How Much Does Google Adwords Cost? The Ultimate Guide To Google Adwords Costs for Ecommerce Sellers

Bogdan Chertes
Google Shopping Campaigns PPC Search Engine Marketing

How much does Google AdWords cost?

It’s one of the most asked questions we hear and love to discuss with businesses who are new to the world of PPC and curious about what goes into the budget, how it gets spent and what to expect in terms of Google advertising costs.

If you’re new to advertising on Google or don’t know the process of ad buying, or how much it will cost you to run an AdWords campaign, we’ve got you covered.

Here’s what you’ll learn:

  • How much Google AdWords campaigns cost
  • What the typical ad spends of Ecommerce businesses are
  • What type of PPC pricing models agencies or consultants use to help your business grow with Google advertising
  • How much agencies or consultants charge to optimize a campaign

1. How Does Google AdWords Work?

Before we dive into the numbers and examine Google ads costs more closely, let’s first take a look at how the process works.

AdWords uses an auction model which determines the ad placement and its cost. The auction begins when a user enters a query on Google. Whenever the keywords used for your ad correlate with the keywords that are being typed by the user in Google search, your ad qualifies for the query and the auctioning process begins.

In the course of the auction, the ad placement and CPC (cost-per-click) are determined by the ad rank, which is further determined by two other aspects: the bid you had set up for the keywords and the quality score of your ad.

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You’ll learn more about the subtleties of the ad charging process further in this guide, but for now, it is important to know that Google offers all the necessary details advertisers need to know so that they can successfully manage their campaigns and have unlimited control on how their budget is spent.

Afterwards, it’s a work in progress, with monitoring and optimization being critical to a successful ad campaign. There are other aspects that we haven’t covered here, so if you want to learn more about optimizing your Google ads cost, check out our Google Shopping Campaigns Optimization Guide.

how much do google adwords costs

1.1 Is advertising on Google free?

Keyword advertising is a highly lucrative business for Google. Advertising on Google Search is definitely not free – it’s the main source of revenue for Google, and how the company makes its money. Up to 97% of their revenue comes from pay-per-click advertising.

Google AdWords is a paid advertising solution. It’s based on a PPC (pay per click) model, which gives you the opportunity to feature your ad on Google and affiliates and only pay when a user clicks on the ad and goes to your website (i.e. you pay per click).

Long story short, you are not charged whenever a user sees your ad in Google, only when they click on the ad.

Google-AdWords-costs

At the same time, Google will not charge you for creating and setting up an AdWords campaign, but to run it you will have to agree to pay per each click you receive from the ads. As for the actual costs, it depends on how you optimize your campaign.

Bottom line here is that without signing up for an AdWords account, where you input your billing information, you cannot run a campaign, and by these means, advertising on Google is not free.

2. Is Google AdWords Expensive? How Much Does It Cost to Run a PPC Campaign?

A typical question of new PPC clients is how and when their Google advertising budget gets spent. You might assume your ad budget will last for an entire month, only to be surprised that it was already spent in the first week. This can lead to the misconception that PPC is expensive. However, this isn’t necessarily the case and is more often than that the result of knowing how budgeting works.

2.1 How Does Google AdWords Charge?

Here’s how the money gets spent: there are three bidding strategies you can use in Google AdWords, based on what you or your PPC specialist will decide is best for your marketing goals.

  • The CPC bidding strategy: recommended especially if you want to drive more traffic to your website. Adopting a cost-per-click strategy it is also advisable to use if you want to have a better control over your spent budget. Cost-per-click (CPC) bidding means that you pay for each click on your ads.
  • The CPM bidding strategy: available only for Display Network campaigns and focuses on the number of times your ad shows up in a viewable position. This method is recommended especially if you want to increase awareness of your brand.
  • The CPA bidding strategy: more recommended for campaigns that are focused on conversions. The cost per acquisition measures whenever a user entered your website from the ad and made a specific action, such as purchasing a product or service or just signing up.

Regardless of the strategy you or your PPC agency decide to use, the amount you will be charged whenever the ad is shown/clicked depends in part on the bid itself.

For example, if you use the CPC strategy, then the cost depends on the max CPC bid you set up for your campaign, which represents the maximum amount you agree to pay for a single click on your ad, and also the minimum amount that is required to occupy a certain ad position in Google.

So, if you set the maximum CPC bid to $1, then the maximum amount you will pay when a user clicks on your ad will be $1.

Finally, the costs are described by the minimum amount required to hold your ad position, so in the end, you’ll pay less than your maximum bid value.

2.2 How does PPC budgeting work?

One way to start budgeting a PPC account is on a per-campaign basis. Each one of the campaigns typically has its own daily budget, which you can set depending on their importance.

Take for example a campaign that promotes your best-selling products – it should probably get allocated a larger daily budget than another campaign promoting content to prospective customers at the top of the funnel.

To calculate a monthly PPC budget, all you need to do is calculate the breakdown of daily budgets for each campaign.

For example, if you have an ad with a CPC (cost per click) of $0.50, and you want to receive 200 ad clicks per day, you can calculate an estimated daily budget:

0.50 x 200 = $100/day,  so your monthly budget would come around to $3,000.

You can set this budget to only be spent during certain hours, days and even locations to make the most out of your investment.

2.3 What costs go into my PPC budget?

As you can see, running a PPC campaign can be a complex and complicated process. A true challenge.

Starting with the difficulty of anticipating your competitors’ moves, their bids and the quality of their ads, the success of your AdWords campaign will depend on the skills of the advertiser controlling these complex aspects which represent a necessary step to get the highest results in generating revenue for your business.

adwords-campaigns management

 

Understanding how digital marketing works is useful before starting to invest your money in Google advertising, as there is a large number of variables that can be optimized in an AdWords campaign. These variables can work for you, but they can also work against you, especially if you’re not a savvy PPC advertiser.

In this case, the easiest and most effective strategy you can adopt is hiring a team of PPC professionals to manage the Ad campaign for you.

Having these aspects in view, the budget you need to prepare for a PPC campaign is three-fold:

  • The Ad Spend  – the Google AdWords budget you are willing to invest in your ad campaigns. This i will always be the largest portion of your budget.
  • Agency Fee – The costs of hiring a PPC specialist to make your campaigns successful.
  • Production costs:
    • Banner ads if you are doing Display campaigns
    • Video ads if you are advertising on Youtube

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3. PPC Monthly Costs: How Much Does a Business Spend on Average?

The average small business using AdWords spends between $1,000 and $10,000 per month on their Google paid search campaigns. That’s $12,000 to $120,000 per year.

This average is calculated from our own client portfolio, which includes e-commerce businesses of all sizes, from the small, family owned ones right through to enterprise retailers or luxury brands.

Truth is,  there’s no one size fits all recipe for any type of business, but you should be ready to invest a minimum of $500 per month in AdWords to see viable results.

google-adwords-costs

Setting an AdWords campaign budget will also significantly vary from one niche to another, so determining what is the minimum, most optimal or helpful budget for your business can only be done after a thorough examination of different marketing aspects, such as:

  • The cost of keywords based on the industry
  • Your business’ seasonality
  • The type of your campaign and your advertising purpose (such as Black Friday or other special events)
  • Your website’s conversion rate
  • The average revenue that you receive from a single conversion or sale

Once a specialist has an accurate idea of all of the above variables– especially of how the industry, conversion rate, and average revenue rate indicators fluctuate – you can go further on estimating the general CPC, and start to calculate the initial budget.

3.1 How Much Should I spend on Google Adwords?

Your spend will depend on your budget, customer type, product, and aggressiveness. It’s best to start slowly. The first few months are about gathering data and optimizing our information. Once we find some working ads, we’ll exploit them.

A good strategy of estimating your Google AdWords Costs is to run three versions of an ad for at least a month and then analyse all the resulting data from your campaign to see which ad succeeded better.

Starting the process anew the next month, we can analyze all the data once again and create a long term budget estimation based on how each campaign performed.

Want to know EXACTLY how much you should be spending in Google AdWords? Click here for a no-strings-attached budget proposal from a specialist.

Next, you’ll find out what factors can contribute to your spend budget on your Google AdWords campaigns, and have a better understanding of the necessities and complexities of online advertising.

3.2 Factors That Can Influence Google AdWords Average CPC

As you have seen before, how much you choose to spend on Google AdWords is entirely up to you. There are some factors that contribute to your ad spend, such as the ad performance, the seasonality of your business, where you run your ads, e.g. the Display Network, the Search Network or both, and how competitive is the industry you’re in.

Hiring an AdWords expert help you better manage your campaigns, avoid any pitfalls and apply all the best AdWords campaign optimisation practices in order to get the maximum effects from each ad. An expert can also help you manage the factors Google takes into consideration when it comes to the cost-per-click advertisers pay, such as:

  • The quality Score
  • The max CPC bid
  • The ad rank

By taking into account these and other multiple factors, a PPC specialist can constantly refine each campaign and the keywords they use, in order to improve your overall result and attain the most fruitful ROI in online advertising.

3.3 How CPC varies from market to market

Some keywords are significantly more expensive to bid on than others and it’s important to know this before launching a PPC campaign. Take a look at this example that illustrates how Google Average CPC (Cost Per Click) varies from one niche to another:

how PPC costs vary

3.4 Highest Cost per Click in Google AdWords

Both in the US and the UK, the average CPC in AdWords is between $1 and $2. On the Google Display Network (GDN), clicks tend to be cheaper, and the average is under $1.

A research by Wordstream shows that if you’re part of one the following niches, you need to prepare to pay serious money for some of the highest costs per clicks in Google AdWords:

  1. Medical education – $110
  2. Business services – $58
  3. Insurance – $48
  4. Mortgage – $47
  5. Attorney – $47
  6. Claim – $45
  7. Loans – $44
  8. Lawyer – $42
  9. Recovery – $42
  10. Degree – $40
  11. Plumber – $39
  12. Credit – $36
  13. Software – $35
  14. Classes – $35
  15. Trading – $33

As you can see, the most expensive CPCs are representative for B2Bs – business to business – and services businesses, while e-commerce businesses usually have lower costs.

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3.5 Why Should I Invest in Google AdWords?

Investing in Google AdWords it can be very cost effective if done right or it can be a waste if not managed properly.

Data has pointed toAdWords as being the most effective method to help your business grow:

  • Nearly 41.3% of the users click only the first three results.sing AdWords to appear on the top of the search engine pages gives your ad the opportunity to be seen and clicked on by a larger proportion of users.
  • Online users and customers with high commercial search intent click on the PPC ads 65% of the time.

google-adwords costs

 

Google paid search advertising channel is an efficient way to make your clients reach out to you, as it captures your target audience at the right time, exactly when they need your services and are ready to make a purchase.

Google AdWords campaigns are built on an intention-based strategy and won’t interrupt your audience. Compared to traditional advertising channels and strategies, that are based on distracting the audience from what they are doing, PPC serves the interests of both sides – the customer’s request, and the advertiser services and sales performance.

To get maximum efficiency of your budget, you can split up your potential customers into segments based on where they are in the buying cycle:

  • TOFU (top of the funnel) – customers are not aware of the product or that the product exists
  • MOFU (middle of the funnel) – customers are aware of the problem/need and they want to know more about the solutions
  • BOFU (bottom of the funnel) – customers have decided that they want to buy and are researching places to buy from

If you want your ads to be cost effective you usually have to target your campaigns from the bottom and work your way up the funnel. BOFU campaigns can be very cost effective because users have already expressed an interest in your product or service by searching for it on Google. The demand is there, you just have to show them the right product at the right time.

Google AdWords campaigns are fully measurable. You can use Analytics to measure your campaign performance and you can make the changes your ad needs if a campaign is underperforming. You can also track down how many users converted after clicking on your ad, what period of the year, month, week or day is more successful for you, and lots of other useful info that can help your AdWords campaign perform better.

3.6 Is Google AdWords Cost Effective?

PPC statistics show that every dollar spent on Google AdWords PPC campaigns generates at least two dollars in small business revenue. This can, of course, differ from business to business, but since Google AdWords is a fully measurable channel you’ll be able to see the ROI for yourself, aka just how much you spent and how much you gained back.

Clicks on paid search listings beat out organic clicks by nearly a 2:1 margin for keywords with high commercial intent in the US. 64.6% of people click on Google Ads when they are looking to buy an item online.

why-invest-in-google-advertising

In this sense, there is no question whether AdWords campaigns are cost effective – statistics show it clearly – it’s more a matter of how you make use of paid search marketing to efficiently boost your sales performance and get a stronger ROI.

Estimating how much revenue you will get will be influenced on how many clicks you would get for your budget and what your average conversion rate and your average order value are.

If your site is already getting traffic, you can take the conversion rate of the organic traffic as a good indicator of how well the Adwords text ads will perform.

One of the benefits of running an AdWords campaign is that you can control how much you want to spend on each ad, as Google doesn’t set any limits to your budget, so there is no minimum budget investment imposed by Google for an AdWords campaign. The minimum bid per keyword is actually just 5 cents.

There are also different strategies you can adopt to run your AdWords campaign in a way that increases the traffic to your website while decreasing the spent budget.

4. Ad Prices: How Much Does It Cost to Hire an AdWords Expert?

When you decide to run a campaign on Google AdWords, there are three ways of doing it:

    • Hiring an in house PPC employee: extending your number of employees with one or more PPC specialists, depending on your business and the budget you want to spend.
    • Outsourcing PPC services to a consultant or freelancer.
    • Outsourcing PPC services to a specialized PPC agency.

Some freelancers and agencies charge a setup fee, others don’t. Some include analytics consulting, custom reporting, others charge for it. Some businesses will lock you into a minimum commitment (usually 6–12 months), other agencies, like Adfix, will earn your business every month, with no necessary monthly commitment.It’s important that you understand exactly what you are getting for the price.

4.1 In-House PPC Specialist

his option means that a single employee or even a dedicated team of specialists,will efficiently optimize your AdWords campaign on a high-level of brand knowledge, that can give you an important advantage over your competitors.

This can be a good option for you if you plan on spending a large amount on AdWords each month and Google ads are one of your most important revenue streams, OR  if you want to test the waters with an ad spend of about $200 – $300 per month.  If you’re in the first situation, you will probably need some additional PPC software to help you manage campaigns at scale.

However, finding the right in-house PPC management expert is no easy task and you’ll have to take into consideration recruiting costs as well. The average salary for a PPC manager starts around $4,000 per month, plus taxes, but the salary can be a lot higher for a certified AdWords expert.

4.2 Consultant Rates

When it comes to hiring a freelancer, the costs can also differ significantly based on the level of expertise of the PPC consultant, and whether they are accredited as an AdWords Certified Partner or not.

To give you an estimate, freelancers rates usually start from $100 per hour, but if you want someone that has an extensive portfolio and a rich experience in running efficient AdWords campaign you’ll have to get ready for a higher rate.  

Take into consideration that consults or free agents usually work on their own and may have nobody else to cover for them in case of an emergency or vacation, compared to an agency, where there’s always a specialist on call, without putting your business at risk.

4.3 PPC Agencies Fees & Pricing Models

The third option is to contract a specialized digital agency, with employees that are specialized and certified.

This approach offers several benefits, such as minimal personal investment of time and effort in actually managing your PPC account.

Agencies can also boast many years of experience in PPC account management, making them trustworthy partners who can offer expert advice and guidance.google-partner-adwords-analytics

How much does it cost to hire a PPC agency?

Agencies usually work with percentages of your total ad spend, so estimating a fixed amount for their services it is not an easy task to do. However, agency cuts typically hover around the 10% mark, though this varies from one agency to another.

If you’re ready to invest from 10% and up to 20% of your AdWords budget on PPC management services, this is the right option for you.

Agencies also usually have different types of packages or pricing plans, to make it more easy for you to decide what the optimal budget for you is, and how much are you willing to spend at the beginning, or later on, when your business starts to grow.

At Adfix,we charge a performanced-based monthly fee. How much you pay us depends on how much you’re spending on your ads. When the ads start working, you’ll naturally want to increase your ad spend. Our fee scales here, but at a slower rate than you spend.

Typical PPC Agencies Pricing Plans

Below there are three PPC pricing plans we offer to all customers:

  • Starter’s Package: the right option for businesses who are ready to start a Google AdWords campaign investing up to $4,000 in ad spend. This package covers Google shopping and Google remarketing campaigns.
  • Pro’s Package: the perfect option for clients who are ready to invest up to $10,000 in ad spend. The package supports different types of campaigns, like Google shopping, Google remarketing, Google search, Bing shopping and Bing search.
  • Advanced Package: this option is conceived for clients that are ready to invest up to $30,000 in ad spend, and the supported campaign types for this package covers: Google shopping, Google remarketing, Google search, Bing shopping, Bing search and Facebook retargeting.

What does every pricing plan cover?

  • Google AdWords setup fee
  • Monthly PPC management
  • Campaign optimization

Other Pricing Models PPC Agencies Use:

  • Percentage Of Spend Budget- this is a form of traditional commission and it is usually preferred because clients can understand more easily the budget split and can control how PPC services are spending based on a return on their investments. Plus, it eliminates any suspicion of hidden costs and helps clients minimize or maximize their budget as much as it can afford.
  • Degrading Percentages Of Spend –this option is similar to the one above., The only difference is a principle that encourages clients to increase their budget so that the more they spend on Google AdWords, the less they pay the agency for campaign management. Like in all the other cases, the rates and fees differ from one agency to another.
  • Flat Fee: this option is the easiest of all, as it helps clients better understand how much they should pay the agency for their services at the end of each month. Because it allows the possibility of advance payment, this pricing model is the most used among PPC freelancers and consultants.

Specialized agencies often offer different pricing structures, so what you need to expect in terms of service costs directly depends on factors such as the minimum monthly fee of the agency, that further depends on the size and agency experience, and the total budget you are willing to invest in online advertising, as it’s an efficient indicator of the size of your campaigns.

Hiring a PPC specialist or an agency is one of the most important marketing investments you’ll ever make. Take a look at our article detailing everything you need to to look for in the right PPC team for your business.

5. Can’t I run my own PPC campaign?

Of course you can. The beauty of PPC marketing is that the platforms are open to anyone. They’ll take anyone’s money.

That said, PPC marketing has a steep learning curve. It takes years to learn how to tweak ads, creative elements, and bidding to find that sweet spot where traffic explodes and visitors buy. Strong tracking and analysis require technical expertise. Your time can be better spent running your business than poring over spreadsheets.

To sum up, PPC campaigns are an efficient way to boost your brand awareness, generate more traffic to your website and increase your sales, and a good return on investments for your business.

When you decide to advertise on Google you must know that every variable of your AdWords campaign can be traced: the number of clicks, impressions, click-through-rate, conversions and conversion rate, the cost-per-click (CTC), the cost-per-action (or cost-per-acquisition – CTA), and so on, so that you can measure your return-on-investment (ROI) at the end of each month for every campaign.

Although it can take some time to figure it out completely, with the right PPC management that can effectively boost your traffic and conversion rates, AdWords campaigns can make a big difference for your business. If you’re serious about investing into this channel, you will want to have a strategy that’s repeatable, scalable and manageable.

However, to strategically follow the metrics and use them to improve your campaigns over time, you need to have the proper training or hire a dedicated PPC team that can systematically optimize and adjust your campaigns to help you attain a solid ROI.

Author: Bogdan Chertes

Bogdan has helped dozens of ecommerce businesses grow sales and acquire more customers by using data driven PPC marketing strategies.
At Adfix, he leads a team of top class PPC and Social Media experts that help clients maximize ROI from their campaigns.