PPC Advertising Costs: How Much Should Your Business Pay?

PPC Advertising Costs: How Much Should Your Business Pay?

PPC advertising cost for attracting online shoppers

The number of people who buy goods and services online is increasing exponentially. According to a report published recently by Statista, 227.5 million Americans bought goods and services online at least once in 2020, up from 209.6 million people in 2016. Further, ecommerce sales in the United States are expected to reach $709.78 billion in 2020, up from $601.65 billion in 2019.

As more shopping is conducted online, internet advertising is becoming more important than ever for promoting your brand, attracting customers, and growing your business. One of the most effective digital marketing strategies you can adopt to help your business thrive is pay-per-click (PPC) advertising. A well-planned PPC advertising campaign is among the most cost-effective marketing methods to maximize profits for your business.

What Is a PPC Campaign?

A PPC advertising campaign is an internet marketing model in which an advertiser pays an ad publisher every time a prospect clicks on your ad. The ad publisher can be search engines, social media networks, and websites. The most popular PPC advertising platform is Google Ads, formerly known as Google AdWords.

While PPC advertising costs can consume a sizable chunk of your marketing budget, a well-planned PPC advertising strategy can be very profitable, generating very high returns for your business. According to a Google report published in 2019, for every $1 businesses invest in Google Ads, they will generate $8 in profits. Before we delve into PPC advertising costs, let’s look at how a PPC advertising campaign works.

How Do PPC Campaigns Work?

All PPC advertising platforms, including Facebook and Google, use a similar model to sell ad space to advertisers. As Google’s PPC platform is arguably the most powerful advertising system on the internet, we will focus on how Google Ads works.

keyword choice determines PPC advertising cost

The Google Ads system is based on keywords. You select and bid for the keywords that prospects will use to search for your products and services on the Google Ads platform. In your bid, you will specify the maximum dollar value you will pay Google every time a prospect clicks on your published ad. The higher you bid, the more likely that your ad will be placed at the top of Google’s search results for that specific keyword search.

Quality Score and Ad Rank

A high bid value can significantly increase your PPC advertising costs. Fortunately, your bid value is not the only determining factor that will influence your ad placement in Google’s search results. Your ad’s quality score, which measures the relevance and usefulness of your ad in relation to the search query, also plays an influential role in determining your Ad Rank in Google’s search results.

Google uses a simple formula to determine where to place your ad in their search results. The Ad Rank formula is: ((your maximum cost-per-click value) multiplied by (your ad’s quality score)). For example, if you bid $3 for the keyword “hair loss shampoo”, and your ad has a quality score of 8, then your Ad Rank is 24. The advertiser with the highest Ad Rank will have their ad placed at the very top of search results for that specific keyword.

To determine final PPC campaign costs for an ad, Google uses this formula ((Ad Rank of the ad below yours) divided by (your ad’s quality score) + $0.01). This formula allows you to pay just enough to outrank the advertiser below you and maintain your ad position. The final PPC cost might end up being lower than your original bid price.

How Much Does PPC Advertising Cost?

There are many factors that can influence PPC advertising costs on Google Ads. While some PPC cost factors are within your control, there are other cost factors that may be associated with your industry and competitors. Google Ads allows you to control your daily PPC advertising budget, maximum bid price for a target keyword, and the quality of your ads and landing pages.

Factors Influencing PPC Campaign Costs

While Google Ads is a very customizable and user-friendly platform, there are factors beyond your control that can determine your average PPC advertising cost. The industry you operate in, your competitors’ maximum bid price for a target keyword, and the quality of their ads and landing pages are PPC cost factors that you can’t control. These factors will ultimately determine how much you should spend for your PPC advertising campaign.

Average PPC Advertising Cost

Businesses that operate in different industries pay different rates for their target keywords. Depending on the lucrativeness of the industry and competitiveness of the keyword, cost-per-click rates can vary, from $40 to $50 in the legal, insurance, and financial industries, to just a few cents for other less lucrative industries.

The overall average PPC cost for all industries is $1 – $2 in Google’s search network. This translates to an average PPC advertising cost of $9,000 – $10,000 per month for small and medium-sized businesses. If you run a smart and efficient PPC advertising campaign on Google Ads, you can expect a very high return on your advertising investment.

Factors That Can Inflate Your PPC Campaign Cost

Running an effective and successful PPC advertising campaign is not cheap. But there are certain practices you should avoid to maximize the return on every dollar you spend in your Google Ads PPC campaign. Follow these tips to reduce your PPC advertising costs:

Using Short-Tail vs Long-Tail Keywords

A lot of digital marketers make the mistake of targeting short-tail keywords for their PPC advertising campaign. Short-tail keywords have a high search volume and are very competitive. As a result, they have higher CPC rates than long-tail keywords. Although they have a higher search volume, they are more general in nature, and tend to produce low-quality leads for your business.

Long-tail keywords are more specific queries, producing higher quality leads for your business. These keywords, in general, have a much higher conversion rate than short-tail keywords, generating more bang for your advertising buck. Long-tail keywords are less competitive and have lower search traffic, resulting in lower CPC rates. Targeting long-tail keywords can increase your conversion rates and decrease your PPC advertising costs.

Disregarding Your Ad’s Quality Score

Many advertisers think the maximum bid price for a target keyword is the ultimate deciding factor that will determine their Ad Rank in Google’s search results. While the bid price does play an important role in ad placement, your ad’s relevance and landing page quality also influence where your ad will be positioned. Google takes user experience into consideration when deciding where to place ads on their platform.

To reduce your PPC advertising costs, you can bid a lower price for your target keywords, while working on improving the quality of your ads and landing pages to enhance user experience. To improve your quality score, choose a keyword that’s relevant to your advertisement, use engaging ad copy to maximize your click-through-rate, apply an attractive design to your landing pages, and incorporate ad extensions into your advertisements for a better user experience.

Improving user experience decreases PPC advertising costs

Working on improving your quality score will help decrease your PPC campaign costs by allowing you to bid lower for the target keywords while still earning top placement in Google’s ad platform.

Ignoring Google Ads’ Advanced Targeting Technology

The Google Ads platform has an advanced targeting technology that allows you to direct your ads to a very specific audience. This strategy will help you avoid targeting your ads to people who may not be interested in your products and services, reducing the number of low-quality traffic from clicking on your ads.

The more high-quality traffic click on your ads, the higher your probability of making a sale. Use Google Ads’ advanced targeting technology to narrow down your audience to the ideal client that is most likely to purchase your products and services.

Google Ads’ advanced targeting technology allows you to select your audience’s demographics, location, income level, interests, and device usage to help you direct your ads to your ideal client. Using Google’s targeting technology will reduce your PPC advertising costs as it minimizes low-quality clicks on your ad, maximizing the return on your PPC advertising investment.

PPC Campaign Costs Depend on Many Variables

The explosion of digital shopping is forcing many businesses to expand their presence and exposure online. A PPC advertising campaign is a cost-effective strategy to boost your online presence and maximize profits for your business. While PPC advertising costs can be prohibitive for many small and medium-sized businesses, they provide an impressive return on your advertisement investment.

If you want to launch a PPC advertising campaign for your business but don’t know how much budget you should allocate for the plan, contact us to consult with one of our digital marketing experts. Our marketing professionals can help you learn what the optimal PPC budget is for your industry so you can spend your advertising dollars wisely to reduce your PPC advertising costs.

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