If you’re curious about Google Ads, you probably attempted to research how much they cost — only to find the common answer “it depends.” It’s true, your Google Ads budget can vary greatly depending on your campaign goals and keywords. To really understand how Google puts your budget to work, you need to know how it uses the ad auction and automatic bidding.
Google determines ad pricing based on a live auction for ad placement and cost per click. However, the term “auction” doesn’t mean that the highest bidders always win. Google often rewards high-quality ads with lower costs per click and better placements. With the right strategy and budget, any business can make use of these ads.
How the Google Ads Auction Works
Every time your potential customers search for something, a Google ad auction happens in the time it takes the search engine results page to load. In less than a second, two primary factors determine if your ad is eligible for the auction, the placement of your ad on the page, and how much you’ll pay if the ad is clicked.
The two primary factors of the ads auction are your maximum bid and quality score.
- Maximum Bid: For each ad campaign, you’ll set a maximum amount you are willing to pay for a click (Max CPC). For example, the average Google Ads cost-per-click (CPC) is $1-$2 for Search and less than $1 for Display. Some highly competitive industries like law or insurance will have more expensive keywords.
- Quality Score: This is a combination of your ad’s relevance to the query, the expected click-through-rate (CTR), and the user experience on your landing page.
If your ad is eligible for the auction, Google calculates your Ad Rank (placement on the page) using your maximum bid and quality score. As your quality score improves, your CPC and Ad Rank may improve. This is how Google levels the playing field between advertisers with big budgets versus relevant, quality offers. So, you don’t always need a hefty Google Ads budget to see results.
How Google Automated Bidding Works
Google strongly pushes automated bidding as a way to save advertisers time and improve efficiency. Automated bidding adjusts your bids based on the goals you select for your campaign. There are six bid strategies for your ad campaigns, each of which optimizes for a unique goal.
- Maximize Clicks: This strategy prioritizes earning as many clicks as possible within the budget. The goal is to boost visits to your website.
- Maximize Conversions: This strategy prioritizes as many conversions as possible within the budget.
- Maximize Conversion Value: This strategy prioritizes value of your conversions within the budget.
- Target CPA: This strategy aims to maximize conversions while staying within your target cost per action (CPA).
- Target Impression Share: This strategy aims to get your ad in the top spot on the page, near the top spot, or within the search results. The goal is to boost visibility of your campaign.
- Target ROAS: This strategy aims to maximize conversion value as possible within your target return on ad spend (ROAS).
What is Smart Bidding?
Within Google’s automated bidding, four of the strategies are Smart Bidding strategies: Target CPA, Target ROAS, Maximize Conversions, and Maximize Conversion Value. These options use advanced machine learning, which means they use historical data to predict outcomes and then adjust your bids to improve efficiency and meet certain goals.
Smart Bidding is designed to help you:
- Increase sales or leads. The campaign goal is to get as many conversions as possible at a fixed budget or fixed ROI.
- Increase profits. The campaign goal is to get as many conversions as possible at a fixed budget or fixed return on ad spend (ROAS).
Once you turn on Smart Bidding, there is a “learning period” for Google to collect performance data from your ads. This helps Google understand how your ads are working and the results they are getting with the existing settings. After collecting enough data, Google uses that information to start conducting smart bids.
How Much Should I Spend on Google Ads Campaigns?
According to Search Engine Land, your Google Ads budget will often drive how you organize your campaigns:
“If you organize your campaigns by stage or the marketing funnel or conversion type, you can set budgets based on how much each is worth to your business or based on how much click volume you’ll need to meet your goals. On the other hand, you may have distinct budgets allocated by product type, brand, or offer. Segmenting those into distinct campaigns will then allow you to control those budgets.”
One best practice is to create display or search campaigns based on the different categories or sub-pages of your website. For example, a plastic surgeon may not run a single campaign for “cosmetic surgery” to promote his practice. Instead, he might have individual campaigns for:
- Breast Augmentation
- Mommy Makeovers
With this setup, he can set monthly budgets for each campaign and shift spending based on his practice goals. Plus, specific ads will be more relevant to searchers and may receive a higher quality score.
To set your Google Ads budget, you should start with your keyword research and defining campaign objectives. Google’s Keyword Planner helps you forecast potential clicks and CPC for your keyword ideas. You can use this tool to get a better idea of the necessary budget for your industry.
Monitor and Adjust Your Budget
Even with automatic and smart bidding options, you should continue to monitor and adjust your digital marketing until you find the formula that works for your business goals. This is why many businesses opt to work with a team of professionals. We’ll help you test what works and make adjustments.
If you’re interested in more info about Google Ads, chat with us about digital marketing for your business.