How Much Does PPC Cost?

Two common questions we get asked about Pay Per Click (PPC) is “How much does PPC cost?” and “How much do I need to spend on PPC for it to work?”. Unfortunately, whilst these are common questions and completely reasonable things to ask, they are not easy to answer. However, we understand that it is important for people, especially those new to paid search advertising, to have a rough idea of how much they need to spend in order to see whether this is a viable marketing method for them. The simple answer to how much PPC costs is – it depends! This is a frustrating answer, but it’s the truth. PPC depends on a variety of factors that can impact the cost of PPC.

How is the cost per click (CPC) calculated?

Google Ads work like an auction, but the winning ads are not solely based on the highest bid. Google Ads determines the winners and the amount they have to pay per click by the following;
  • Their quality score– A quality score is a number from 1-10 which is awarded depending on how relevant the landing page is to the keyword they are targeting, the expected click-through rate based on historic performance as well as landing page user experience.
Quality Score= Relevance to keyword + expected CTR+ User Experience
  • Ad Rank– Ad rank determines if your ad is going to be shown and where your ad will be placed on the results page. The ads that have the highest ad rank will be the ones that get shown.
Ad Rank= Quality score x maximum bid (the most you’re willing to pay per click on your ad)
  • Cost per click– Once your ad has been chosen to be shown, you will only ever pay when someone clicks on it. You also won’t always pay your maximum bid. The formula to calculate the cost of a click is:
Cost of Click= ad rank / quality score + $0.01 This means that you may pay less per click than another advertiser on the search results page but still be in a higher / better position due to the fact that you have a better quality score. This is why advertisers with a small budget can still compete against companies with larger marketing budgets.

Budgeting

Budgeting is key went it comes to how much you end up spending on PPC ads. It is common for monthly budgets to be used in a few days which can make it seem like Google Ads is extremely expensive, but this doesn’t have to be the case. In many cases, it is down to not understanding exactly how Google Ads budgeting works. Budget– how much you’re able to spend on Google Ads Bid– the most you are willing to spend on a click Spend-the amount Google takes from your budget when an ad participates in an auction Cost– the actual amount you end up paying for a click When you set up a campaign in Google Ads, you will be asked for a daily average budget. It is important to remember that this is a shared budget, so if you have more than one campaign you have to take this into account. This daily budget does not mean Google will spend that amount exactly each day. It is just a rough idea so you know approximately what the cost will be each month. The actual amount could be more or less than this in a day. Google can now spend double your budget in a day – if it means you will get more clicks or conversions. So, if your daily average budget is £50, your daily spending limit will be £100. You will never pay more in a day than your daily spending limit and you will never pay more in a month than your monthly spending limit (which is calculated by your average daily budget x30.4). There are tools available for you to play around with different daily budget adjustments to see how it will impact your overall monthly spend which can be extremely useful.

How much should my budget be?

The budget is dependent on how much you are able to invest in this marketing channel. Here at DBS, we always recommend a minimum of £5 per day. However, this is heavily dependent on the competitiveness and value of keywords. Some keywords related to your business may cost 50p per click, and others may cost a lot more. It is important to know that there are a lot of factors that influence PPC costs.

Factors that influence the cost of PPC

Keywords

Your chosen keywords for your ads are a huge deciding factor in how much you will ultimately pay for your PPC. Extensive keyword research needs to be done before you set up any ads in order to ensure you are targeting the most appropriate, effective, and relevant keywords for your business.

Industry

The industry you work in will have a major impact on the price of Google Ads due to the keywords you are trying to optimise your ads for. Sectors such as professional services like accounting, solicitors, estate agents, etc will expect to have to pay more for their ad campaigns due to the high amount of competition in these areas and the nature of the industry itself. Clients in these sectors are often worth significant amounts, with each new client being worth hundreds if not thousands of pounds to the business. With this in mind, whilst it will involve a higher cost per click, this will be a small price to pay if the customer converts. In other sectors such as art or entertainment whilst the cost per click may be significantly lower than professional services, the business will have to convert a lot more people in order to receive the same amount of revenue from customers.

Customer lifecycle

You should also consider which stage of the customer lifecycle your potential customers are at. For larger, more expensive purchases, the customer’s lifecycle is significantly longer and a business will have to work harder to stay at the forefront of the potential customer’s mind throughout the entire journey so that when they come to finally make their decision, they opt for you. Your PPC ads may be how they discover you, however, you will have to invest in other types of digital marketing to form a lasting impression and several touchpoints throughout the customer lifecycle.

Agency Costs

If you work with an agency on your PPC marketing, there will be an additional agency cost involved. However, they will help ensure your account is optimised, recommend a budget that is appropriate for you, and will help create PPC campaigns that will help you achieve your business goals whilst saving you a considerable amount of time.

How to control how much you spend on PPC

Account Management

The overall effectiveness of your PPC ads depends on the quality of your account management. If you are seeking to keep your PPC spend to a minimum but still receive high-quality leads, you need to ensure your ads are set up correctly using a proper account structure, monitor your reporting and adjust your ads regularly according to the data, keep your keyword list up to date, perform regular account audits and much more.

Ad Scheduling

You can tell Google when you want your ads to be displayed. For example, if your services are not available on weekends or you don’t think people will be searching for businesses like yours at weekends, you can specify you only want them to show on certain days. You can also decide on certain hours which is especially useful for businesses that are trying to encourage footfall into their physical shops during opening hours. This helps reduce the likelihood that you are spreading your monthly budget too thinly and can determine when your ads will have increased visibility.

Geo-targeting

You can also spend more of your budget in certain geographical areas which is called geo-targeting. This means that your ads will only appear for searches in specific areas and you can pick a certain town, a county, or a certain mile radius from your business location. The options are varied. As much as it’s a frankly frustrating answer, the truth is that the cost of PPC really does vary as it depends on so many factors. Whilst your campaigns will inevitably vary in cost depending on these factors such as the industry you are in, there are still ways to keep the cost down. The key is to ensure your PPC account is being correctly managed. Effective PPC is not just about setting up adverts and then just leaving them to see how they perform. In order to get your PPC ads working best for you and with a better chance of succeeding you need to ensure you are monitoring them regularly, setting realistic budgets, ensuring your website’s user experience is good, and doing significant keyword research.

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