When it comes to online advertising, Pay-Per-Click (PPC) Ads offers one of the most competitive tools for building brand awareness, increasing website traffic, in-store visits, leads, and phone calls — and Google Ads provides one of the best platforms for earning these results.
The percentage of SMBs investing in PPC search advertising has grown to 65%! This is majorly due to them directing their ad spend to Google Ads, which is known to offer some of the most impressive returns on investment.
Last time we checked, the online advertising platform provided a return of $8 for every $1 spent. Still, there are many small businesses that have their apprehensions about how much Google Search Ads costs and if it will provide the returns they were promised.
In this blog post, we have made the whole “PPC ad spend” topic simple to understand. It will help you learn about how Google Search Ads work, latest PPC statistics, what you should do to maximize your ROI, and finding the right budet to invest in Google PPC Search Ads.
So, let’s get started!
What is Google PPC Search Ad?
There are many PPC advertising platforms out there. Google Search Ads is a PPC advertising platform developed by Google. Formerly known as Google AdWords, this PPC advertising platform is one of the most used PPC platforms on the Internet.
Professionals and business owners can use it to create advertisements by bidding on relevant keywords and controlling the amount of money they are willing to spend for every click that happens on their ads.
All advertising operations that happen on Google Search Ads are based on a real-time auction system. Whenever a user searches for a keyword that is relevant to your ad, and if the bid you’ve mentioned is more than that of your competitors, your ad will show up on top of the search results.
But, here’s the thing that makes Google Search Ads a great PPC advertising platform. You only have to pay for ad clicks, making it clear that advertisers won’t be charged for the impressions and frequency at which an ad is shown.
How Does Google Search Ad Work?
You will never completely get to the bottom of how much to spend on Google Ads if you don’t understand how exactly the platform works. There’s so much to learn in Google Ads that it might take many more articles for us to explain things comprehensively. But since your question is quite simple, we don’t really require to dig-in that deep. At least in this article.
To create a realistic budget and wrap your mind around the Google Ads cost, you will have to understand Google’s auction system. Google Ads auction model has been developed over time to successfully determine the cost and placement of ads. As we mentioned earlier, the ad auction is triggered whenever an online user makes a Google search. The moment the entered search terms match the keywords selected by advertisers, the ads are sent to the online auction that happens in real-time.
The ads, now within the auction, are tested for ad placement and CPC. This is done using the ad rank of the eligible ads.
Ever heard about Quality Score? Well, the ad rank is based on that and the maximum bid you have set for the search term or keyword.
Quality Score (QS) is a huge topic in itself and requires a separate article to understand it completely. But for now, you can think of Quality Score as a parameter Google uses to determine if your ad is worth it to be shown against a particular search term or keyword.
Google Ads uses the ad rank to calculate how much you are going to pay per click.
Google calculates your cost per click (CPC) by the following formula:
CPC = (ad rank of the ad below yours) / (Your Quality Score) + $0.01
A higher QS will result in a lower CPC.
That’s the most important thing we think you should take away from this section.
2020 PPC Statistics Of Paid Search Ads
Since Google PPC Search Ads appear on search engine results page, let’s take a look at the stats for 2020.
- $132 billion is how much search advertising spending is projected to grow worldwide by 2022. (Source)
- $46 million is how much search ad spending accounts for in the U.S. in 2020. (Source)
- $6.75 is the highest average CPC for Google Ads, belonging to the legal industry. (Source)
- $1.16 is the lowest average CPC for search on Google Ads, belonging to ecommerce. (Source)
- 90% of advertisers say search ads are the most important PPC channel. (Source)
- 85% of US internet users, or 242 million people, executed searches monthly in 2019. (Source)
- 80% is about how much search ads can increase brand awareness. (Source)
- 65% of all high-intent searches result in an ad click. (Source)
- 45% of all online advertising revenue in the U.S. in 2018 amounted to search. (Source)
- 45% of page clicks are earned by Ads that appear in search results. (Source)
- 42% of all digital marketing spending is search marketing. (Source)
- 41% of all clicks go to the top three paid ads in search results. (Source)
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Finding The Right Budget For Your Google Search (PPC) Ads
We are not going to oversimplify things just to make you feel that you can conquer Google Ads overnight. There are advertisers who pay as little as $50 per month, and there are advertisers spending more than $10,000 a month on Google Ads. They’ll get the results they expected because they are well-versed with the platform, which most definitely, is a result of them spending a countless number of hours honing their PPC advertising skills.
So, with that out of the way, let’s provide you with a step-by-step procedure to know how much you need to spend on Google Search Ads.
Step 1: Figure Out Your Goals
Yes, this is a question you need to ask yourself in the first place – “What is your goal to run ads on Google Ads?” If your goal is to get better results from what you have now, the amount you are going to spend on the ads will become a very important variable to your advertising success. Let’s say you have a product that you need to sell to 100 new customers in a month through PPC. There are tons of other online marketing that you do which always helps in digital advertising. Let’s figure out how can we get this done.
Step 2: The Cost of Traffic (CPC)
Now that you know what you want, having a reasonable estimate of the budget is crucial to hitting your goal. You need to have an estimate of the cost of driving traffic. So when it comes to Google Ads, you will need to use Google Ads Keyword Planner to estimate the cost on the basis of the CPC mentioned for the keywords. Let’s say we do a quick search of the relevant terms and find that most of them cost approximately $4 each (CPC). Also, let’s assume you have a budget of $3,000 for a month. Bringing it all together, we can get almost 750 visits per month with the given budget and mentioned CPC on Keyword Planner.
Step 3: Know Your Website Conversion Rates
To be able to get a complete overview of what your conversion rates look like, you need to check out your Google Analytics. What we mean by “website conversion rates” is the number of people who have successfully submitted a form, gave you a call, or requested for an appointment. Generally speaking, most well-designed websites optimized for high conversion rate get 10% conversion. Since we calculated 200 visits per month through Google Ads, your total website leads will most probably be 20 (10% of 200). If you have an e-commerce site, the conversion rates will be much lower, maybe in the 1-2% range.
Step 4: Rate of Lead Conversion
While you focus on getting better at Google Ads and bringing in more and more leads for your business, it’s important for you to build an effective staff that is converting leads into customers. Businesses who do great at advertising, but lack proper customer service suffer in the growing competition. Given the fact that most leads are already interested in purchasing your products or services, the rate of conversion for your business will range anywhere in between 50% to 90%. This is when you are getting an inquiry via call or email and selling your services.
Taking that into consideration, let’s say your lead to conversion rate is 70%. Your total new customers will be 14 per month (70%) out of 20 leads.
Step 5: Keep Everything Organized
One of the most crucial things that you will eventually learn by dealing with Google Ads is working in a way that simplifies all the calculations you need to do to get to your goals. You can create simple Excel sheets where you can mention the following attributes –
- Average Cost Per Click (CPC)
- Monthly Budget
- Website Visits
- Website Conversion Rate
- Total Leads
- Lead to Customer Conversion
- Total New Customers
Creating an Excel sheet and mentioning all the values against these attributes will give you an exact idea of whether you spending more or spending less than you need to. Now, let’s get back to the example where we needed to get 100 new customers per month. If you followed us through this article, you will notice that a $1000 budget will not help to get us 100 customers a month at a $5 CPC. To get to 100 customers per month, we can do the same math, but with a bigger budget. As per the calculations, we will have to spend a little more than $7000 on the ads to accomplish our goals of 100 paying customers per month.
Over to You
Finally, while execution is the key to success, you need to play the “Test and Learn” game as well. It’s important for you to understand that the variables we mentioned earlier are needed to be taken care of. You can adjust these variables and run your ads and learn from the ads’ performances. The more you work on the insights, the better you will get at Google Ads. We wanted to provide you with a simple model that you can follow and have an idea about what you need to do and how much you need to spend to get it right on Google Ads.