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How to Determine Your Google Ads Budget?

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How much should you spend on Google Ads campaigns? It’s entirely up to you. Whether you choose to advertise on Google, Facebook, or LinkedIn, the amount of money you have to pay varies. It depends on your industry, location, competitors, desired goals, target market, and some other factors I’m going to mention later.

In this article, I will tell you what you should pay attention to when calculating an approximate Google Ads budget. I will also help you understand better how to choose bidding strategies properly to maximize conversions.

So, let’s take a closer look and see what you can do to estimate a reasonable Google Ads budget.

Google Ads Budget: An Overview

Before you jump into spending dollars on Google Ads, first, you should understand the basics of this marketing platform, and what exactly you’re paying for.

Figure out as much of the marketing as possible before buying in with Google Ads. Understand your customers. Offer value. Think through your segmentation, targeting, and positioning and see how items link up to different keyword targets you’ve identified. Be ready to pivot quickly if things don’t work, but also do give it time and room to breathe. Know how long it should take to see leads or sales come in so that you’re not prematurely abandoning an approach that could work given more runway.

Imagine the Google Ads platform as a big market where you can buy traffic to your website. So, you come there with a specific monthly budget you’re willing to part with. To get that traffic, you have to bid on keywords relevant to your industry, product, or service.

Just like in any other market, the competition is big. And if you don’t have an unlimited sum of money to spend on Google Ads, you have to think carefully about the keywords you bid on to get the best results without blowing your budget.

How to calculate the initial Google Ads budget?

To get a clear picture of how much money you need to invest in Google Ads and how much traffic you will get, you should always have realistic expectations.

To determine an initial Google Ads budget, you must first clearly define your goals. With set goals, you will be able to reverse engineer what budget you should start with. For example, say your goal is to gain 100 new customers. If you have a 4% conversion rate and the average cost-per-click in your industry is $2, you will need to spend $50 to gain one customer and $5,000 to earn those 100 new customers. The best tip I can give someone who is just starting to run Google Ads campaigns is to set clear goals and agree on those goals with all stakeholders. Whether you are on an internal marketing team or working for an agency, if your goals aren’t clear, the stakeholders will never be satisfied. As Zig Zigler famously said, if you aim at nothing, you will hit it every time.

Let’s imagine you already have your budget and want to know how many clicks (aka traffic) you’re going to receive within that budget. Here’s the formula you can use to calculate your approximate traffic:

Number of Clicks = Budget/Average CPC

Now, let’s assume you don’t know how much you should spend on Google Ads, but you have an idea of how much traffic you’d want to get. Here’s how you can determine your approximate budget:

Budget = Desired Clicks x Average CPC

*Note: CPC stands for Cost per Click – the amount of money you pay for each click on your ad.

Below you can see the average cost per click within the United States.

That said, it’s solely your decision on how much money you want to spend on Google Ads. You should base it according to your company goals, objectives, and the amount of traffic you want to drive to your site. Some companies always invest in it to increase their sales, some do it from time to time, and some never do it.

What Factors Affect the Cost of Google Ads?

Google Ads is a bidding platform, so the ad price is based on the demand for the keywords you want to show up for.

I start from the bottom and work my way up. Increasing your bid can get expensive quickly, so I do a lot of keyword research for the least expensive bids and increase my bids with those keywords the most. Once my campaigns with those cheaper keywords have found success, I work my way to more expensive keywords now that I have a fighting chance.

Jennifer Merrigan | Digital Marketing Specialist at VirtualPBX

Here’s what influences the price of keywords you bid on when running ads on Google:

Location

Unlike some old-school advertising methods (radio, big boards, banners, etc.), the price of online ads differs from place to place and depends on the popularity of that location. So, to make it clearer, you’ll pay more for ads in California and NYC rather than in Vietnam or Siberia.

Apart from that, what you’re advertising in a particular location also matters a lot. For example, on average, you will have to pay $17.71 per click advertising your insurance business in the US, whereas it will cost you only $0.48 per click in Mexico.

Competition

Your competitors’ budgets and aggression play a tremendous role in online advertising. And the reason is pretty apparent. Money. The bigger the budget, the better the results of your Google Ads efforts (considering you know what you’re doing.)

However, if you’re one of the SMBs, it’s hard and sometimes almost impossible to compete with massive enterprises. That’s when Google Ads come in handy. Unlike SEO, they give you a chance to appear in the first results of Google search even if you are a small business. So, if you want to compete on par with your rivals, you should give Google Ads a shot.

Industries

As I’ve already mentioned earlier, the price of Google Ads for certain industries can be either super high or low or somewhat in the middle. For instance, it will cost you much more to run ads for a SaaS business than for a carpet cleaning company.

To give you a better idea, here’s an average CPC for different industries in the US.

Keywords

Once it’s time to create Google Ads campaigns, you’ll come across an avalanche of keywords related to your industry. However, it doesn’t mean you’ll need to use them all. That’s why you need to conduct extensive keyword research to find the right ones.

The more effort you put into keyword research, the more likely you are to reach your goals. Pay attention to the size of the market (aka keyword volume) and competition. Also, consider bidding on your brand keywords to grow awareness. If you’re thorough enough, you might find loopholes that can save you a lot of money.

Try competing on more long-tail terms that still have volume but aren’t as expensive. Once you actually launch the campaigns, you can adjust the bids and match types to be in line with your goals.

Also, you should take into consideration that keywords with intent tend to be more expensive than informational keywords. It’s because people search more with a specific intention or urgency. For example, bidding on a keyword “sell my house fast” keyword will cost you more than just bidding on a “sell my house,” but it will also bring you more clicks in return.

Check out the difference between the cost of keywords for the real estate industry below.

Time

Days and hours you make Google Ads visible for your target audience influence the price you’re going to pay. Of course, you wouldn’t want your ads to be shown at times when people are asleep or not browsing the internet. You wouldn’t also want them to start calling you when your business is closed. Consequently, you have to pay to make sure your ads reach your desired audience.

Another factor that can impact the cost of Google Ads is holidays and big events like Super Bowl. Since most people are online during those times, the prices for Google Ads (especially remarketing ones) are usually skyrocketing.

Six tips to consider when creating your Google Ads campaigns

  • Use Google Ads Keyword Planner and spend time selecting the keywords you want to bid for.
  • Group your keywords by categories in small ad groups with hyper-relevant ad copies.
  • Test different keyword categories.
  • Create appealing landing pages relevant to the keywords you use.
  • Set up your Google Analytics tracking to record your leads and sales (it’s the only way the algorithm can learn what’s working or not working, and optimize accordingly.)
  • Be patient, start slow, learn, and improve as some campaigns might take up to one month to show results.

REMINDER:

  • You can always check your expected cost with the Google Ads Planner to ensure you never spend more than your budget.
  • You only pay for the clicks, not impressions (for most campaigns.)

BONUS: How to Bid Less but Appear First

When choosing a Google Ads bidding strategy, you should rely on various strategic factors in your business and have a clear understanding of your goals. Here’s how you can spend less money and enhance your Google Ads results at the same time.

1. Focus on improving your ad’s quality score

The most powerful bidding strategy, by far, is to focus on improving your ad’s quality score. By doing this, you’ll not only rank higher, but you’ll also save a ton of money as you won’t have to use the ad money as a crutch. If your quality score is higher, you’ll rank higher and get more clicks without having to spend more.

The better your quality score, the cheaper your bids, and the higher your ad rank.

Ad Rank = Bid x Quality Score

So, how can you improve your ad’s quality score? I prepared a few suggestions for you:

  • Ensure your site is secure and trustworthy (add testimonials, copyright, privacy policy)
  • Grow your DA (domain authority)
  • Increase your page speed
  • Write relevant and engaging copy for your landing page
  • Create quality and well-targeted ads

P.S. At Zima Media, that’s exactly what we do for each of our Google Ads Management clients.

2. Start small

Start with small budgets, something you can effectively write off as a loss in the beginning, and play around in Google Ads. Tweak, adjust, kill, and reinvent, and eventually, you’ll start to see a pattern of success emerge. Build on that from there.

Matt Seltzer | Market Research & Strategy Consultant at S2Research

3. Choose bidding strategies according to your goals

My advice to someone first starting out in Google Ads is to have a clear goal or KPI you’re hoping to achieve. Are you looking to generate high lead volumes at a low cost? Are you looking to maximize reach? Are you looking to drive as much traffic to your website as possible? Research the keywords and audiences you’ll need to attract to hit those goals, and then start a pilot campaign that targets them. As data begins to roll in, refine your bid strategy to funnel spend where you’re seeing the best results.

Final Words

Creating a Google Ads budget is a pretty sophisticated task, and you probably won’t enjoy it. Yet, it’s the most critical part of your marketing strategy. It requires you to have clear business goals and expectations of what you want to achieve from each of your Google Ads campaigns.

Your initial Google Ads budget will mostly depend on your industry, keywords, location, competition, target market, and goals. So, if you have never run Google Ads, consider the first months as test ones. Adjust daily ad spends, experiment with bidding strategies, A/B test your landing pages, and make sure your ad copy is always relevant and on point. Also, don’t forget to allocate your budget between different campaigns and work on boosting your ads’ quality score.

Once you have enough data to work with, you can go ahead and spend as much money on Google Ads as your heart desires. Just don’t forget to make sure your ads are effective and bring you positive results.

Want someone to help you determine your Google Ads budget and take over your paid search campaigns? We can start managing your Google Ads today!

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Damien Bouvier
Damien Bouvier
Damien is the co-founder of Zima Media and is a Google and data-certified professional with an MBA in information technology. For several yearsm he has conducted technology audits, provided consulting services, and implemented data projects for businesses across varying industries.
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