Note: This is the second article in a series of three guides for content specialists on how to optimize your paid advertisements. If you haven’t already, please visit our blog to catch up on the first, then check out the last!
“Hey Google… how much does a PPC campaign cost, and how much is it per click?”
Let me know if your Google Home gives you an answer, I’ll wait. In the meanwhile, let me say that this is a reasonable question and one that I hear all the time. It’s understandable to think that as a business owner, you’ll want to get the most out of each dollar that you invest in a marketing campaign. Unfortunately, there’s no simple answer to this. On the contrary, it becomes a smorgasbord of relevant information that all fits together to create a bigger picture.
The first thing to understand is that we (and most firms) are able to advertise on Google and Bing. But for simplicity’s sake, I’m going to only reference Google Ads. Google Ads is now known as Google AdWords. So when asking the question, “how much does Google AdWords cost?” you’ll need to understand a few variables. Here’s an overview of what I want to discuss in this post.
- The Auction and Bid System
- This system utilizes a quality score (almost like a credit score for your AdWords account) to adjust the cost and placement of your ads.
- Your Budget and Target
- You have a high level of control over how much money you spend within a timeframe, and how much money you spend advertising to a specific market. Regardless of if it’s your target market or not. This is important to note to prevent wasting money.
- The Variables Affecting CPC
- Scheduling, Geofencing, Device Targeting, etc.
HOW DOES GOOGLE ADWORDS WORK?
This is a hard analogy to make, but the Google AdWords system works much like an auction house. I say it’s hard because unlike an auction, whoever has the most money doesn’t necessarily always win in getting in front of eyeballs. But like an auction, there are bids that take place to see who gets to be seen.
Let’s run with this analogy. Imagine that the item up for sale in our auction is the advertisement itself. The auctioneer hops up and begins to rattle off fast words, and the individuals that put up their little paddles to bid on whether or not their ads get shown to the public: those are the business owners who are buying a PPC campaign.
If you’re following along with the analogy, you might be thinking, “If this is like an auction, then the sale of the advertisement goes to the highest bidder, yes?”
Slow down, Charlie. This is where AdWords sets itself apart. There are two factors that play a role in who wins this bid, it’s not just about the money. Google does consider the advertiser’s bid, sure, but Google also considers the projected quality of the Ad. It’s quality score. Consider that Google didn’t become the search giant that it is today because it simply sold search results to the highest bidder — there’s much more to “Googling” than being inundated with advertisements from advertisers. There’s a level of trust that you have in Googling a word or phrase, and knowing that Google will show you quality material over just promoted content.
I won’t go too deep on the quality scorein this post, you can find that information on our next post on PPC: Quality Score. For now, just understand that Google uses an algorithm to determine which ad gets displayed by combining the max bid (in dollars) per keyword, with both the projected and historical quality score of your account. This gives you the cost per click. So yes, this means that PPC can start slow until you have a few campaigns under your belt, and you get that quality score up.
Once your max bid and quality scores are determined, you’re given an ad rank with Google and you’re told how much you’ll pay per click of your ad. I’m a visual learner, so let me break this down for you a little more visually. Use this chart as an example:
Your Price = (The Ad rank of the person below you / Your Quality Score) + $0.01
|Max Bid||Quality Score (x/10)||Ad Rank||Calculated CPC|
|Joe’s Hair Styles||$3.00||(10) * * * * * * * * * *||18||(14/10) + .01= $1.41|
|Sleek Clips||$7.00||(5) * * * * *||14||(8/5) + .01=
|Bob the Barber||$9.00||(2) * *||8||Highest CPC|
You see how even though Joe is bidding the least amount of money per ad, he’s going to get his ad shown and pay the least per ad that is shown? Other factors affect this, but essentially Google understands that clients who search for hair stylists are going to have an enjoyable experience both on his website, and at Joe’s business.
YOUR TARGET BUDGET AND BUDGET TARGET
Let’s talk a little bit about how your money gets spent as you advance through a PCP campaign. You can think of your budget in the same terms of any other budget. This is the upper limit that you’re willing to spend on the entirety of your campaign. Google allows you to break down budgets on the basis of a daily, weekly, monthly, lifetime spend, or even by the number of demographics reached. What you’ll need to do is calculate how many leads are reasonable for you to convert into sales. If you’re running multiple campaigns and your wallet isn’t unlimited, you’ll want to consider which campaign should get the majority of your budget.
Say for example you want to see 500 clicks on your ad per day. This will give your sales force enough leads to pursue in trying to close business. Once you establish your AdWords campaign and Google gives you a CPC, you’ll begin to understand if your budget is enough to meet your goals. Say your CPC is $0.45. You can calculate that 500×0.45 will give you a budget of $225. Are you prepared to spend $225 a day on advertising? This can seem like a high number, but consider that every click is a potential lead that actually has a chance to make a purchase. That’s something that you can’t say about TV, print, or radio ad costs.
In the above example, it’s important to note that 45 cents is the max you’d pay for a click. The actual amount that you are charged per click can be lower, depending on the auction results. But it’s important to note that it’ll never be higher.
LIKE CHAFF BEFORE THE WIND
If you’re still with me, you might be wondering if there’s a way to specify who sees your ad. Sure, people can search your specific keywords and see your ad, but it’s possible that a 14-year-old doesn’t really need your psychological services when they search “I hate my mom.” They probably aren’t going to click on your ad. So how do we tell Google that we aren’t targeting specific people? So glad you asked because there are a few different ways.
Don’t confuse this for a vampire reference. Dayparting is the industry’s term for specifying when you want your ads to appear to potential clickers. Your ads will still go through the auction process, but you can turn it on or off during specific times of the day, or days of the week.
This practice is especially useful for businesses who are trying to drive customers to a brick and mortar building with specific operating hours. It might not do you any good to show an “order now” call to action to someone at 11 pm. for your restaurant that closes at 9 pm. But if you don’t want to miss the opportunity to show your services to customers who might be very likely to visit (especially if they search for something that your business would match with perfectly), you can allocate a larger portion of your budget to your operating hours, and a smaller portion of it to other times of the day or week.
Just like budgeting your ad for specific times, you can budget for specific locations. Telling Google to not show your ad to anyone searching outside of a 20-mile radius is a great way of eliminating advertisement costs to someone who would probably not visit your store anyway, regardless of how well your service fits their needs. There’s probably someone that’s closer that can do the same thing for them.
Telling Google to prioritize (or only show) your ads on mobile or desktop is a great way of narrowing down potential clients. A little bit of light research on when your specific audience uses their phones, then aligning your ads to show heavily around those times may be the edge that you need to turn a so-so PPC campaign into a killer one. There’s a lot of data that work together to create a bigger, more full picture of what your PPC campaign can look like. And listen, don’t underestimate the potential of mobile advertisements. Even baby boomers and Matures are beginning to use smartphones more frequently these days. PPC campaigns work well if you (or your marketing agency) is willing to put in the time to do just a little bit of research.
WHAT IF I DON’T HAVE $37.9 BILLION TO SPEND ON PPC?
Some folks love to point out the exquisite amounts of money that certain keywords cost on Google. Yes, it’s true that the keywords insurance, loans, and lawyer can cost $50+ per single click, but the reality is that most keywords won’t actually cost you that much. Certain industries have a much higher CPC because their average lifetime value of customer tends to be higher.
The reality is that long-tail keywords make up the majority of the PPC world and in fact the majority of all searches.
LONG IN THE T… AIL
A long-tail keyword is a keyword or phrase that contains at least three keywords. Although some experts argue that it only needs to include two or more. Who really knows, right?
These specific keywords are used to narrow down your niche target, rather than advertising to a mass population. The more specific the phrase being typed into Google is, the easier Google’s job will be to place appropriate content in front of the searcher. According to Google, the keyword lawyer costs $109 per click. Yikes. But what if someone searched, “how to legally file for divorce.” The term ‘lawyer’ isn’t anywhere in that phrase, but chances are that person still needs a lawyer. We can intuit this because they included the keywords legal, divorce, and maybe file. This then becomes a long-tail keyword, and because it doesn’t include the specific keyword lawyer, chances are it’s much, much less expensive for the advertiser.
Keeping this in mind, if your AdWords campaign includes very specific keywords like the ones mentioned above, and someone happens to search two or three of them, your ad will have a higher chance of being displayed.
So how much does a PPC campaign cost? The short answer: it depends.
Stay tuned for the next blog post where we discuss your quality score in more detail than you could have ever asked for.