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How Much Should I Spend on Google AdWords?

Investing your marketing budget in a PPC platform like Google AdWords can have a big impact on your business. According to Google, the average advertiser on AdWords makes two dollars for every dollar they spend. But how much should Google AdWords cost? This will of course depend on your industry niche, company size and a few other variable explained below. 

If you’ve heard of paid search, you’re probably also familiar with the term PPC, which stands for pay-per-click. This means that you don’t pay for your ad to be displayed, and you don’t pay when viewers roll over the ad with their mouse – you pay when somebody actually clicks on your ad. This is much better than paying per impression (called CPM) because your ad might be displayed 100,000 times and only one person clicks on it. CPM bidding doesn’t make sense because you’d be running up your costs for essentially nothing. Instead, you pay for each actual click, and then the responsibility is on you to make use of that opportunity to convert the visitor.

So what determines how much you pay per click? Google uses an auction-style bid to set their prices. For any given keyword, you have the top bidder – let’s say they bid $5 for someone to click on their ad. Then you have the next highest bidder who values a click at $4.50, another at $3.75, another at $3.00, and so on, all the way down to the last person who says that they value a click on their ad for that keyword at, let’s say, $2.25. 

While your bid does play a large role in determining whether or not your ad is served for a given keyword, Google also uses something called “quality score” in making these decisions. Quality score is an algorithm that scores each of your ads for relevancy – it looks at how closely your keyword relates to your ad and how closely your ad relates to your landing page content. In other words, Google actually scans your landing pages to ensure that you’re not just buying keywords and directing them to totally irrelevant pages.

Remember, always be optimizing your campaigns! There’s never a shortage of ways to improve your paid search campaign. Keep making improvements so you can drive your performance up and your costs down and ultimately run a successful PPC campaign.

Have questions about advertising on Google? We're here to help Just ask On-Target!.