What does AdWords cost?
AdWords and Google Ads work similarly to an auction principle . The ad with the highest bid “wins” and appears above the search engine’s organic results . Advertisers only have to pay after clicking on the ad. An exact statement about the AdWords costs is therefore not possible – influences such as the competitive situation and the quality factor have a very strong effect on the costs of online advertising and do not allow general statements.
The display position is important. Because of the better the position, the higher the CTR. So qualitative and quantitative factors play a major role in AdWords costs.
Google AdWords Costs – The Most Important Facts
- In the search results, costs are only incurred when clicking: just appearing the advertisement costs nothing (with the CPC model)
- Opening the AdWords account and creating the AdWords campaigns is free.
- You determine an amount that you are willing to spend per day/month.
- You determine how much you want to spend on one click on an ad.
- The higher the bid, the more likely the ad will be shown and the ad position will be high.
- The better the ad position, the more clicks it can get.
AdWords prices depend on the billing model
Google offers different billing models for showing ads. The most common is the CPC model.
The most important features of the AdWords billing models:
Cost-per-click – costs arise when you click on the ad
Depending on the industry, ad, keyword and search query, the CPC fluctuates between a few cents and over 100 euros
Cost-per-mille – 1000 contact price – Costs for 1000 impressions of the ad
in the display network for websites with very high traffic
Example: Youtube – Skippable Ads (In-Stream Ads)
Specification for the cost of a conversion
Influence on the AdWords costs in the CPC model
How much it ultimately costs you to click on an ad is influenced by the following characteristics:
The greater the competition for a keyword , the more expensive it is – there are more bidders who want to be in the first position in the ad. Therefore, Google can choose whichever offers the most. In second place is the one with the second highest bid, and so on. However, there is one factor that can greatly influence this order – the quality factor .
Ad quality – quality factor
Ad quality would suffer if the ads were to appear based on who offered the highest price. Consequence: The user would not necessarily be shown the most relevant ad for his search. That would result in a poor user experience and negatively affect user opinion about Google.
The quality factor therefore also decides how high a bid has to be in order to achieve a top placement. It is given on a scale from 1 to 10 , whereby the higher number means higher quality and thus also a potentially lower advertising price or a better position.
How good the quality factor is depends on:
Keyword relevance (in relation to the landing page the ad leads to)
estimated click rate
User experience on the landing page
More information: Google Ads Help – Quality Score
Importance of landing page quality
The influences on the quality score described above show that the quality and relevance of the target landing page have a major influence on AdWords costs or, more precisely, on your ROI . The better the website fits the search query and the better the user experience with this website, the better the performance of your AdWords campaigns will be .
Higher ad positions tend to be more expensive than lower positions. But that doesn’t mean that if you pay the highest price, you will automatically end up in the first position. Because the quality factor has a significant influence on the calculation of the ad rank. The ad rank is the value according to which Google determines the order of the ads that appear. It is calculated as follows:
Ad Rank = Maximum CPC x Quality Score
You always set a budget for ads that you are willing to spend in a certain amount of time. Once that is used up, your ads will no longer appear. An advantage for other bidders, because you are no longer a competitor. For keywords with a very high search volume or very high costs per click, it is very likely that hardly any competitor can always be displayed for all relevant search queries.
Since all of the influences mentioned here (keyword competition, quality factor, etc.) are checked for each search, the costs per click are always different . However, you never exceed your specified maximum CPC or the framework set by Google that the system has available for automatic bids.
Calculate the AdWords budget correctly
The keyword planner gives you an idea of where the journey is likely to lead in terms of maximum CPC. The average click price is given there. It is usually in the range between 0.40 and 2.00 euros, but can also go far beyond that. Seasonal factors can have a huge impact on the CPC.
In order to be able to calculate the required AdWords budget better, Google offers some limitation options . The starting point is a daily budget . So you decide how much you want to spend on your ad per day. Converted to monthly budget planning, you would have to multiply this daily budget by 30.4 days.
You can also pause the campaigns at any time if you find that too much money is being spent.
Other important factors to be able to calculate the AdWords budget correctly:
Position within the customer journey
Where on the customer journey would you like to pick up the customer with your ad? At the very beginning at a point where there is a pure need for information? Shortly before buying / calling / booking? As a rule, the closer the ad is aligned to the end point of the customer journey, the more expensive (high CPC) it becomes. In return, wastage is reduced and the probability of a purchase increases considerably.
Cheap vs. expensive products
More margin means more leeway in terms of AdWords costs. The scope for CPC for low-price products is correspondingly small. But the product specifics also play a role here: the more specific the product, the lower the search volume and the more difficult it can be to market with AdWords. The CPC and, in the end, the monthly costs may be low, but the ad placement is of little use if your product is rarely searched for or is only known to a very small group of users.
The right bid strategy for low AdWords costs and high conversions
Your ads will run until your daily budget is used up. This way you can be sure not to spend too much money each day. However, setting the budget alone is usually not enough to achieve positive results with the ads, in other words: to keep the AdWords costs low on the one hand and to achieve high conversions on the other . It is important to develop the right AdWords bid strategy, for example by spreading the ad placement over the day and only showing it at certain times of the day.
Influence on AdWords costs with the CPM model
As described above, with this bid strategy, you pay for every 1,000 views of your ad on the Google Display Network.
How high the AdWords costs are in the CPM model depends on:
The relevance of the website to your product/service
Reach of the website on which your ads appear
Ad Visibility – Ads that appear in the viewable area of the website are more expensive than those that appear as you scroll
You can determine relatively precisely on which page the advertisement is shown in order to present your products/services to the right target group. In addition, the Display Network offers many more types of ads than the Search Network: Image, Rich Media, Flash Ads, and Videos.
The disadvantage of CPM: You always pay the same price (for the 1,000 impressions), the performance of the ad is irrelevant. Because whether someone clicks on the ad is irrelevant for the calculation. The CPM model is therefore preferred to achieve reach or to strengthen the brand. In this case, videos or pictures are of course the first choice because they attract more attention.
Influence on AdWords costs in the CPA model
The CPA is generally an important indicator, as it shows how high the financial cost for a conversion is. After all, when placing an ad, it must be taken into account that it is profitable, i.e. that it does not reduce the margin unnecessarily.
Put simply, with the CPA model, you only pay for a successful advertisement, i.e. an advertisement that actually achieved a conversion, at a price you set.
AdWords offers two ways to use CPA in ad campaigns:
The target CPA indicates the average cost per conversion.
Conversion tracking must be set up.
There must have been more than 15 conversions in the last 30 days.
Target CPA is one of Google’s smart bidding bid strategies, which means that Google automatically adjusts the values. To do this, the provider accesses historical data from the tool. The aim is to generate as many conversions as possible to the given target CPA from the given budget.
How high the target CPA ultimately is influenced on the one hand by the advertiser’s previous conversion values and on the other by numerous real-time factors. If the time for conversion is classified as favorable, the system increases the bids and the display of the ads. Accordingly, the bids are lowered when the sale is unlikely.
With this model, however, payment is still made by the click, even if, ideally, conversions are achieved with the specified target CPA.