Google Ads Pricing Factors & Variables

Google Ads Pricing: Factors & Variables You Need to Know

Understanding the many Google Ads cost factors and variables empowers your business to proceed with a solid game plan that fits your budget and (hopefully) maximizes your return on investment (ROI). 

While a Google Ads campaign can be a lucrative investment—the average ROI is $8 for every $1 spent—using Google’s complex platform isn’t as straightforward as placing your ad and raking in profits. 

There are no guarantees in digital marketing, but there are certainly ways to tip the odds in your favor. That’s where we come in. As the industry’s premier paid advertising experts, we can help you navigate every step of your Google Ads journey and get eyes on your brand. 

Having a firm grasp on how Google Ads pricing works will help with budget planning, but actually implementing effective ad campaigns is a whole other challenge that you shouldn’t attempt to maneuver on your own. As you’ll discover, Google Ads are extremely competitive—it’s easy to be overshadowed.

Let’s take an in-depth look at the Google Ads cost variables you need to know to plan an informed campaign.

Variables That Affect the Price of Google Ads

What you’ll pay for a Google Ads campaign isn’t set in stone. Across-the-board pricing would make things a lot easier, but when you dive into the details, Google’s fluctuating charges do make sense. 

Here are the primary factors that influence the sliding scale.

1. Industry

A screenshot of a Google search for “online education”

Every business is unique, and Google Ads pricing reflects the amount of (potential) value on the table. For example, there’s a big difference in ROI for a law firm acquiring a new client and a retail shop selling a T-shirt. 

Industry is the most powerful factor that determines the cost. The Google Ads cost per click (CPC) spectrum is vast—in the US, the highest average CPC was $9.95 (online education industry); the lowest average CPC was $.68 (electronics industry).

When you put what’s happening behind the scenes under the microscope, you see that the sliding scale pricing is logical. An online education institution can earn thousands of dollars in tuition through one ad, while an electronics store may only end up profiting a few bucks.

Weighing Google Ads pricing for your industry and the potential profit your ads could generate isn’t an exact science, but it’s a solid starting point that should at least give you a basic idea of what to expect, give or take.

2. Customer Life Cycle

Another important variable is how long it takes for a potential customer to actually convert. After all, a click doesn’t do a whole lot of good if the customer doesn’t actually follow through.

Using the example above, a person considering enrolling in an online education institution isn’t likely to sign up as soon as they click the ad. Those online schools would need to look at the big picture when estimating Google Ads pricing. 

The student may need to visit the website multiple times, watch informative videos, join a webinar, download content, and so on. The school’s advertising goal isn’t merely to attract a single click, but to remain top-of-mind as the student weighs their options. Naturally, competition is fierce.

On the other hand, a single click can easily lead to a conversion for the electronics store. Say someone is searching for a power supply. There’s a high chance that the first ad that shows up on Google’s search engine results page (SERP) makes the sale. While it’s possible that the customer may return down the line, the main goal is to sell a product immediately.

Simply put, a longer customer life cycle means higher Google Ads pricing.

3. Current Consumer Trends

Seemingly unrelated global events can cause the Google Ads cost per click average to rise and fall accordingly. 

For example, in April 2020, 68% of surveyed marketers said they had already launched a live campaign in direct response to the COVID-19 pandemic. During this tumultuous period, some ads thrived because they met the new and changing needs of customers, while others flopped because customers weren’t willing to spend money during such an uncertain time.

As you can see, industry, global events, and the current ad cost are often all directly intertwined. A business that sold N95 masks could generate massive profits during that time, but they could also be overshadowed by the drastic influx of competition.

Understanding how Google Ads pricing can shift based on external contextual variables helps you to adapt on the fly and decide if it’s wiser to ramp up your ads or take a step back.

4. Account Management

Keeping your spending low and profits high takes work. You must be vigilant or fall behind. Proper management of your account is a key component in achieving and maintaining that elusive sweet spot.

Effective account management takes many forms, including the following:

  • Data-driven search engine optimization (SEO)
  • Maintaining your keyword lists
  • Performance reports
  • Auditing your account regularly (and making changes as needed)

How Google Ads Cost Per Click Is Determined

Google Ads pricing is an auction. There are winners and losers. Fortunately, you can drastically improve your chances of emerging victorious by partnering with us! We know how to keep expenses down and profits up. Here’s a look at how Google decides what you should pay.

1. Quality Score

Even the best ads can flop if your Quality Score isn’t up to par. Your site is assigned a grade from 1-10 based heavily on how accurately the content of your ad matches your landing page. If the two aren’t in alignment, it gives the impression that your ad is misleading, and you’re going to receive a low grade (and a higher cost).

Simply put, your Quality Score affects the Google Ads pricing because high-ranking, trustworthy businesses pay less. 

Google’s algorithms are constantly checking to see if businesses are bidding on advertising keywords related to search inquiries. If so, all relevant ads are entered into an auction. Unsurprisingly, those with high Quality Scores have the highest chance of winning the prize of lower costs and better placement.

It’s worth noting that Google blocked or removed over 5.5 billion ads and suspended 12.7 million advertiser accounts in 2023 alone. Quality Scores matter!

Bidding competition can be fierce, so we strongly recommend giving us a call before you start wasting money on ads that are likely to get outbid. We can take action steps that actually use this bidding system to your advantage and keep your Google Ads pricing low. 

Real-Life Example: Competitor Campaigns

A screenshot of a Google search for “chumba casino”

Here’s a concrete example of how Quality Scores can plummet when ads don’t match landing pages.

A competitor campaign is when you purposefully make your ads appear in front of your competitors’ audiences searching for them by name. The goal is to pull people away from the competition and bring them to your business instead. 

You can see an example of a competitor campaign in the image above. The search for “Chumba casino” reveals an ad for a rival casino that calls itself the “#1 Chumba Replacement.”

While a competitor campaign can be effective when implemented properly, it can cause Quality Scores to fall and Google Ads pricing to rise. The reason the Quality Score falls is because Google’s algorithms detect a disconnect between the words on the landing page and the keywords that were bidded on. While ‘Chumba’ appears by name in the ad title, ‘Chumba’ and ‘Casino Replacement’ do not appear anywhere on the landing page.

2. Ad Rank

Your custom-tailored cost will also be affected by your Ad Rank, which is your Quality Score multiplied by your maximum bid for the ad. As you probably guessed, a higher Ad Rank means prime placement. 

Money talks. Just like you’re going to shell out big bucks for a Super Bowl ad, you’re going to have to pay for prime SERP real estate. That’s why keeping your Quality Score up is so crucial—high scores reduce entry fees.

3. Google Ads Cost Per Click 

Google Ads pricing is based on clicks—you only pay when you get one. However, you don’t necessarily have to pay your maximum bid.

Here’s the formula that determines the cost of a click:

The Ad Rank of the ad below yours, divided by your Quality Score, plus one cent.

So, what does that formula mean for your price? Well, it further pushes the point that Quality Scores matter! With a stellar Quality Score, you can actually pay less than the competition and have better ad placements. Even if you’re working with a small budget, you can still compete with the major players if your Quality Score outranks theirs.

Budgeting for Google Ads Pricing 

Now that you know how and why Google Ads costs fluctuate, let’s dive into budgeting. Here are the key points to keep in mind as you plan your spending.

1. Daily Budget

As you set up a Google Ads campaign, you’ll be asked to specify your daily budget, which is the maximum amount you’re willing to spend per day. That figure is just a guideline—the actual figure can be lower or higher on any given day. However, at the end of the month, the average of your spending will reflect your daily budget.

2. Spending Limit

A screenshot of a diagram showing how Google’s daily spending limits work

Your spending limit differs from your daily budget in that Google can actually spend up to twice your budget if that spending will lead to an increase in clicks and conversions. That said, your Google Ads pricing won’t exceed your monthly budget (your average daily budget multiplied by 30.4).

Factors That Influence Your Budget

We’ve already covered how your Quality Score is determined, which directly affects your Ad Rank, which directly affects your Google Ads cost per click. Now, let’s quickly highlight some factors that can influence how your budget gets spent.

1. Ad Scheduling

Ad scheduling, also known as dayparting, is when you specify specific times when you want ads to be displayed. For example, a local bar may want to display ads more prominently at night when people are searching for a place to go. If relevant, make sure most of your budget goes towards prime time slots.

2. Location Targeting

Making the most of Google Ads pricing may involve allocating a percentage of your budget to specific areas. For example, it would be silly for that local bar to advertise to people overseas. Focus your budget on places where people are more likely to convert.

3. Device Targeting

You may want to budget your Google Ads cost based on specific user devices. For example, if you’re trying to spread the word about a mobile app, targeting mobile users would be the best way to spend the majority of your budget.

How Bidding Works

Your bid is the maximum amount you’re willing to pay for a click. You can manually set different bids for individual keywords in a group. You can also strategically automate the bidding process to achieve certain results, such as gaining more target impressions or maximizing clicks.

While bidding low can keep Google Ads pricing low, there’s also a very high probability that the competition will claim the premium spot. Of course, bidding too high can quickly lead to a burned budget. Finding that balance requires professional assistance, so give us a call!

What’s the Typical Google Ads Cost Per Click?

As you’ve probably realized by now, expenses vary incredibly widely from business to business. Here’s a quick overview of the average CPC for US industries in 2023:

  • Online Education: $9.35
  • Insurance: $8.41
  • Legal: $6.83
  • Marketing/Advertising: $6.56
  • Internet/Telecom: $4.52
  • Online Banking: $4.47
  • Real Estate: $1.87
  • Automotive Dealerships: $1.63
  • Home/Garden: $1.61
  • Beauty/Skincare: $1.61
  • Fashion Retail: $1.42
  • Travel: $1.34
  • Jewelry: $1.08

Coalition Technologies Is Here to Help — Every Step of the Way

Google Ads pricing is complex, to put it mildly, but you don’t need to feel overwhelmed. With a top-tier Google Ads marketing agency on your side, planning and launching a successful campaign that fits your budget is actually quite straightforward. We’ll be right by your side throughout your journey, ensuring that every penny is spent wisely.

Our pay-per-click case studies and client reviews speak for themselves. If you’re ready to take your online advertising game to the next level, or if you have any questions about these Google Ads cost factors and variables, contact us now for a free consultation. Don’t let Google Ads pricing stop you from hitting your sales goals. Partner with the world’s best Google Ads agency!

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