What Does Google PPC Cost? Google Ads Budgeting For Beginners
Getting started with Google Ads and understanding the pay-per-click (PPC) pricing model can seem complicated and intimidating as a beginner advertiser. If you just want a quick benchmark, a daily budget between $20 to $100 is reasonable for most small businesses to begin Google Ads testing, depending on your industry and campaign goals. However, accurately calculating ideal budgets based on your expected customer lifetime value and niche can help optimize profitability faster.
We are aware that many companies have concerns like:
“How large should my daily budget be when I’m first launching campaigns?”
“How exactly does the cost per click get determined and how much should I expect to pay?”
Without understanding your specific business goals and industry dynamics, we can’t throw out an arbitrary daily budget amount to use across the board. Depending on the niche you operate in, appropriate starting budgets to run a small-scale test can range dramatically based on average cost-per-clicks.
However, by taking the time to consider a few core factors that significantly impact advertising costs on Google Search, Shopping, Display and other channels, you can determine an appropriate minimum budget tailored to your unique needs as a new PPC manager.
We’ll look into:
Key pricing factors that dictate cost per click rates
Calculating expected conversion value per acquisition
Steps to forecast and set minimum required budgets
Attribution modeling considerations
Ongoing performance benchmark analysis
Understanding these elements before launching campaigns allows you to set realistic spend levels, target the right long-term return metrics and scale budgets sustainably based on value.
Key Influencing Factors on Cost Per Click Rates
As touched on above briefly, several variables specific to your individual business model and market vertical have significant influence over what you can expect to “pay per click” through Google Ads. Calling these out upfront paints a clearer picture.
Industry Competition Levels
Some verticals like legal, wealth management and higher education operate in “high consideration” spaces where people devote more time researching options. Customers also tend to have higher lifetime values (LTV) here. Those dynamics allow for pricier paid search auctions.
In the most competitive verticals, it’s not uncommon to see Google search ad clicks run $50 or higher, especially for premium keywords around service offerings. We often observe an average CPC range of $15 to $35+ across our clients in these spaces.
By comparison, quick-purchase decision verticals such as discount retail, travel bookings or household services feature more bargain hunting. Cost per clicks here may only reach $1 to $5 since margins and LTV trade significantly lower.
Understanding where your niche typically falls is essential for projecting potential click expenses.
Lead Gen vs Transactional Business Models
Are you focused strictly on direct online conversions and transactions through ecommerce or services? Or is the priority further up the funnel just driving new contacts and leads?
Transactional business models optimized for completing sales can warrant much higher bids, pushing average CPCs upward. However, lead generation niches can remain cost efficient with lower bids while still delivering downstream business value per click. How your offerings capture value affects ideal bid levels.
Degree of Competitor Targeting Overlap
Bidding against dominant brands with massive PPC budgets and market share means competing within higher-stakes auctions for coveted terms aligned with their offerings. Their advertising dominance lets them aggressively push prices higher.
Alternatively, shifting focus to rank for very specific, niche long-tail keywords with less direct competition provides opportunities to keep average click costs lower. Not chasing high-volume brand name terms can minimize costs.
Quality of Landing Pages and Creative Messaging
Google actively monitors how well your ads and landing pages deliver relevance, quality information and ease-of-use for searchers once they click through. All of this factors into your quality scores.
Low quality accounts with very broad, vague and blatantly promotional ads sending people to irrelevant pages get penalized through higher minimum bids requirements. By sticking to highly relevant messaging that satisfies intent, you enhance quality to reduce average costs.
Now that we’ve covered the major variables that dictate cost per click pricing within Google Ads... let’s explore how to apply those insights into building your starting budget.
How to Forecast Your Minimum Budget Needs
Armed with estimates of potential average CPC expenses given your business model and niche, you can calculate top-down budget minimums required to give Google Ads an initial test drive and collect enough performance data before optimizing further.
Step 1: Estimate Your Typical Customer LTV
What is the average lifetime value (LTV) of a new customer? For ecommerce, this may be their repeat purchase rate over 12-24 months. For services, the ongoing revenue value. This gives you a benchmark to gauge appropriate cost per acquisition (CPA) caps.
Step 2: Set Target Conversion Rates
Google what typical conversion rates are industry benchmarks for lead gen sign-ups or product sales from paid clicks. Set reasonable expectations - these range widely from 0.5% up to 10%+ based on funnel depth.
Step 3: Review Typical Cost Per Clicks
Use Google's free Keyword Planner tool to research historical paid search click costs related to your offerings. Also research benchmarks by industry.
Step 4: Run Budget Calculations
With your expected:
Conversion rate
Target CPA based on LTV
Estimated CPC
Plug those variables into this equation:
Expected Conversion Rate x Target CPA Bid ÷ Estimated CPC = Estimated Clicks Needed Per Conversion
Then determine:
Estimated Clicks Needed Per Conversion x Estimated CPC = Suggested Minimum Budget Per Conversion
Multiply that by your volume goal for conversions per month. The end result gives you a good starting budget minimum for testing during that timeframe while collecting enough performance data to further refine.
Ongoing Optimization Considerations
With your initial Google Ads campaigns and budgets in place based on expected benchmarks... focused attention shifts to tracking real results through closed-loop attribution modeling and analytics.
Carefully monitor conversion rates, cost per conversion trends and rollout return on ad spend (ROAS) calculations specific to each campaign.
Tweak daily budgets up or down accordingly based on profitability indicators, not vanity metrics like clicks or impressions. Allow performance data to guide budget decisions rather than guesses.
Google Optimization Standards
It’s no secret that Google have been actively pushing their automated bidding (Smart Bidding) strategies since they first came out. Even though these solutions offer less control over your bids, they do provide you with the ability to utilize Google’s AI to optimize your campaigns for you. The automated approach can seem like a hands-off process, but it still requires a significant amount of optimization and analysis. It also comes with its own set of standards that need to be met for you to fully utilize the capabilities of Google’s Smart Bidding AI.
Currently, Google Ads requires at least 30 conversions (50 for target ROAS) per campaign over a 30-day period to fully optimize when using automated bidding. This allows their AI to better correlate signals that improve performance. While hitting this threshold can be difficult within individual tightly-themed campaigns, marketers can roll up conversion data across multiple related campaigns using portfolio bidding strategies.
By applying portfolio bidding strategies across all campaigns tracking the same conversion action, meeting the 30 conversion monthly minimum gets easier. This unified approach surfaces more data signals for Google's algorithm and allows you to achieve lower costs.
As we mentioned previously, it’s still important to remember that even with automated bidding, human optimization remains vital - continuously refining targeting, creatives, landing pages and negative keywords essentially "guides" automated bid managers over the long-run. So skilled oversight still greatly impacts returns.
Wrapping Up
By taking the time to research your average customer LTV, niche competitor dynamics and typical cost per click rates alongside your unique conversion funnel... new advertisers can set practical Google Ads budgets aligned closely to attaining positive ROI as campaigns scale. If determining a profitable Google Ads budget seems too complex given your current workload, our expert team is here to help - reach out for a free account assessment and custom budget plan tailored to your business growth goals.
This article was written with the support of A.I. technology.
