Google Adwords does not charge a fee in order to use the Google Adwords platform. You pay on a Cost Per Click basis, meaning you are only charged when someone clicks on a link in your ad and visits the website or landing page that is associated with that ad.
The question you really want answered is how much do I need to spend on Google Adwords in order to make it work for my business. Here we will discuss how to determine what budget you will need in order to effectively advertise on Google Adwords.
In order to determine a realistic daily/monthly budget, we will need to know a few things:
- What your estimated Cost Per Click will be
- Estimated search volume for a search term you will be targeting
- An estimate on how many visitors you will need in order to get a conversion
Note, when you are first starting an Adwords Campaign, you will only have estimates, these numbers will be refined once you start running your ad campaigns and can get some real data.
Cost Per Click
This is the cost to you when someone clicks on one of your ads and visits the website or landing page associated with that ad. Your cost per click is determined by several factors, including:
- How much you are bidding on a given keyword (Cost Per Click Bid)
- Your Quality Score, which is your determined by your expected clickthrough rate, ad relevance, and landing page experience
- Other factors that make up your Ad Rank, which determined in what position your ad will display.
As you can see, there are lots of factors that determine your Cost Per Click, so the estimated Google gives you with the Google Keyword Planner are just loose estimates.
Estimated Search Volume
Estimated Search Volume will give you an estimate of how many people search for a given keyword during a month. You want to know this because you may have a keyword you want to target, but it may only be searched for a few times a month in your market, which means you would need to add other keywords to your campaign in order to get enough “click volume” to have an impact with your Google Adwords campaign. When you are first starting out, especially if you are a local business, you will most likely need about 10-20 keywords in your initial campaign in order to generate enough search volume to get the amount of clicks you want to meet your goals.
Your Estimated Conversion
Now Google Adwords can't determine this for you, this is something you need to estimate yourself or will need to wait until you have enough Google Adwords traffic to your site to make a determination.
Once you have an idea of how many visitors (clicks) you need to your website in order to generate a conversion, then you will be able to determine how many clicks you need each month and how much you need to spend in order to get that amount of conversions for your business. Conversions can be anything you determine as the goal for your Google Adwords campaign, it can be sales, leads, email signups, etc.
Here's an Example
Jim owns a landscaping company in Charlotte and wants to generate new business with Google Adwords but is not sure how much he needs to spend in order to make it work.
Jim heads over to the Google Keyword Planner, which is a free tool inside the Google Adwords platform and does a search for landscaping keywords. He sets the search criteria so it only shows search data for the Charlotte area.
He sees that there are dozens of related keywords that people in the Charlotte area use to find a landscaper. He finds two that he likes, “landscaping companies”, which has an estimated monthly volume of 10-100 which has an estimated CPC of $7.20, and “landscaping service”, which has an estimated monthly volume of 10-100 searches at an estimated CPC of $5.74. Note that Google Adwords only shows general search volume for new advertisers and for small budgets, as you spend more you will get access to more specific data, but it's still a good place for general estimates.
Jim estimates that he will need about 10 clicks in order to generate a lead, either someone calling his business or filling out a form on his website. He made this estimate because his website now generates a lead for every 40 visitors to his website, but since these keywords are very targeted and specific, he thinks he will have a much better conversion rate targeting these two keywords.
So if Jim wanted to get a rough estimate on budgeting for his Google Adwords campaign for these two keywords, he would average the Cost Per Click of the two keywords ($6.47) and times it by the amount of clicks he wants to generate.
So if Jim wanted to generate 10 leads in a month for his business, he would need about 100 clicks (using his conversion estimate) to get these leads. At $6.47 a click, he would have to spend about $647 on his Google Adwords campaign in order to generate the 10 leads he wants. This can be broken down to about $21.30 a day (647 / 30.4 = 21.28) for a daily budget.
Now these are very rough estimates and they will 100% change once you run your campaign and get real data, but it serves as a great starting point if you are just starting out with Google Adwords.
Important Things To Know
If you are just starting out with Google Adwords, you want to shoot for a minimum of 10 clicks a day and run the campaign for at least a month in order to get enough search volume and data in your account to make some more accurate estimates on your costs. Note, these are minimums, if Jim the landscaper tried to run a campaign for $5 a day using the same estimates, he would never really get enough click data in order to know if Google Adwords works for his business.
Have questions or need help with setting up an effective Google Adwords campaign? If you are new to Google Adwords you may also qualify for a free promotional credit you can apply to your account, you can Contact us here to learn more.
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