How Much Does Google AdWords Cost?

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“How much does Google AdWords cost?”

It’s a reasonable question, and one we hear all the time, especially from newcomers to paid search. After all, those new to PPC are probably most interested in how much they’ll be expected to shell out to advertise on Google, and whether they can even afford it!

Unfortunately, there’s no easy, one-size-fits-all answer. The most common (and infuriating) answer is, “It depends.”

The cost of AdWords depends on several variables. In this post, I’ll explain how these variables will impact your ad spend, and demystify the concepts you’ll need to understand in order to set a realistic budget for your ad campaigns (and determine if you should use AdWords at all).

Here's a high-level, TL;DR preview of what you'll learn in more detail in this guide:

  • Google AdWords is based on an auction system that rewards businesses who have high-quality ad campaigns with lower costs and better ad placement.
  • You can exercise tight control over how your AdWords budget is spent using tactics like ad scheduling, geotargeting, and device targeting.
  • The average cost per click in Google AdWords is between $1 and $2 on the search network. The average CPC on the Display Network is under $1.
  • The most expensive keywords in AdWords and Bing Ads cost $50 or more per click. These are generally highly competitive keywords in industries that have high customer lifetime values, like law and insurance.
  • Giant retailers can spend up to $50 million per year on paid search in AdWords.
  • The average small business using AdWords spends between $9,000 and $10,000 per month on their Google paid search campaigns. That's $100,000 to $120,000 per year.

Now, let's examine these points about AdWords costs more closely.

How Does AdWords Work?

Before we dive into the figures and start talking cost, it’s vital that you know how the AdWords platform actually works.

One of the biggest misconceptions about AdWords is that whomever has the most money to spend has the most influence. While a bigger ad budget never hurts, AdWords is actually a more level playing field than many new advertisers realize.

Google AdWords functions in essentially the same way as an auction. Let’s take a look at how this process works.

The Ad Auction

The ad auction begins when a user enters a search query, after which Google determines whether the query contains keywords that advertisers are currently bidding on.

How much does AdWords cost Google ad auction

If advertisers have bid on some of the keywords in the user’s search query, the ad auction begins. The purpose of the auction is to determine Ad Rank, or where each ad will be positioned. The auction determines the inclusion and placement of ads according to the Ad Rank formula based on two main factors – maximum bid and Quality Score:

 How much does AdWords cost Google ad rank formula

Note: We won’t go into the specifics of the Quality Score formula in this post, but if you want to learn more about how Google determines the Quality Score of your ads, we’ve written extensively on the topic. Check out these resources to learn more:

So, back to how AdWords works. Once your Quality Score and Ad Rank have been calculated, Google uses this data to determine how much you’ll pay each time someone clicks on one of your ads. This formula looks like this:

How much does AdWords cost how much do you pay per click

Notice how Advertiser I can pay less for a higher position due to their better Quality Score?

This is essentially how AdWords works in a nutshell. There are variables that aren’t covered here, such as alternative bidding methods and ad formats, so if you want to learn more about how AdWords works, check out the full infographic here.

Now we’ve brushed up on the fundamentals, let’s dive into the numbers.

How Does My Google AdWords Budget Get Spent?

A common scenario that many newcomers to paid search find themselves in is when their advertising budget gets spent much more quickly than they anticipated.

Understandably, this can be quite a shock. Advertisers might assume their ad budget will last them for a month, only to discover that they’ve blown through their small budget in a matter of days. This can lead to yet more misconceptions about paid search, namely that it’s prohibitively expensive. However, this isn’t necessarily the case, and is more often than not the result of a misunderstanding of how budgeting works.

PPC Budgeting Basics

You can think of ad budgets in the same way you would about any other budget. You start with a core figure that will represent the majority of your ad budget, and allow for a little leeway in case things change or something goes wrong. One way to start budgeting a PPC account is on a per-campaign basis.

Each campaign has its own unique settings tab in AdWords. This allows you to control specific parameters of each campaign independently of other campaigns in your account.

Each campaign should have its own daily budget. If you’re running several campaigns simultaneously, you should think about which campaigns have priority. For example, a campaign advertising your best-selling product may be more important to your business than another campaign promoting content to prospective customers at the top of the funnel. In situations like this, you might want to allocate a larger daily budget to the product campaign.

If you’re planning a monthly PPC budget, all you need to do is calculate the breakdown of daily budgets for each campaign, and allocate your funds depending on the priority of each campaign.

How Daily Budgets Get Spent

How much does AdWords cost daily budget

Let’s say you have an ad with a CPC of $0.25, and that you’d like to receive 300 ad clicks per day. Using these figures, you can calculate an estimated daily budget:

.25 x 300 = $75

In this example, 25 cents is the most that you’d be charged if 25 cents is your maximum CPC. However, the actual amount you could be charged per click can change, depending on the variables of each individual ad auction.

Just remember that, if you set your maximum CPC at 25 cents, you’ll never pay more than that for a click – but you might end up paying less.

Sounds simple enough, right? Well, there are several factors you should consider that can impact your PPC budget, the first of which is dayparting.

Worried about your AdWords Performance? Want to see how you measure up? Grade your account for free!

Dayparting

Also known as ad scheduling, dayparting is the practice of specifying when you want your ads to appear to prospective customers. Although your ads will still have to go through the ad auction process, you can tell Google when you want your ads to be displayed.

How much does AdWords cost ad scheduling settings

This is especially useful for local businesses that want to drive customers to a physical location through their ads. If you run a bakery that closes at 7 p.m., for example, you may not want your ads to be shown outside your normal business hours. Alternatively, you can specify that your ads run continually throughout the day, but allocate a greater portion of your daily budget for hours during which you want increased visibility.

To learn more about dayparting and ad scheduling, check out this guide.

Geotargeting

Just as you can allocate more of your budget to certain times of day, you can also spend more of your budget on certain geographical areas. This technique is known as geotargeting.

How much does AdWords cost geotargeting local PPC

Geotargeting allows you to prioritize the display of your ads to searches coming from specific areas. These areas can be as large as a state or province, or as small as a three-block radius from your store.

Geotargeting can be an excellent way to capitalize on growing mobile traffic trends and on-the-go shopping habits of today’s consumers, and it might factor into how you allocate your daily ad budget. For example, you may want your ads to appear alongside relevant searches in a particular state, but you could also allocate more budget to searches conducted in a specific city or even neighborhood.

To learn more about geotargeting and local PPC, check out this guide.

Device Targeting

Long gone are the days when prospects searched exclusively from desktop browsers. Today, consumers are searching the Web across numerous devices (often at the same time), which means you need to pay attention to where your most valuable leads are coming from. This is where device targeting comes into play.

How much does AdWords cost device targeting

Let’s say that you want to appear on results across both desktop and mobile searches, but that mobile traffic is more valuable to you. You could specify that a portion of your budget be used for desktop, but a greater portion be allocated to mobile devices. You may even want to devote more money to traffic coming from specific types of mobile device, depending on what you’re advertising or your ad copy.

Setting a daily budget and understanding how it will be depleted are the most important aspects of budgeting for PPC, but it pays to be aware of how advanced targeting options can affect your ad spend.

Google AdWords Pricing: How Much Does a Typical Click Cost in AdWords?

Once you know what PPC is and how paid search works, it makes sense that your next question might be, “How much does a typical click cost?” As I mentioned earlier, though, this is not an easy question to answer.

In some ways, you can think of PPC advertising roughly along the same lines as traditional print advertising; you’d expect to spend more on a glossy full-page ad in a national magazine than you would for a classified ad in a local newspaper. In digital marketing, the distinction isn’t in the format of the ad, however, but rather the commercial intent of and competition for the keywords you’re bidding on. Some keywords are significantly more expensive to bid on than others, depending on how competitive the market is, and it’s important to realize this before launching a PPC campaign.

In the US, if you average across all different types of businesses and keywords, the average CPC in AdWords is between $1 and $2. That's on the search network. On the display network, clicks tend to be cheaper, and the average is under $1.

However, in super-competitive markets, clicks can get much pricier. Let’s take a look at some of the most expensive keywords in AdWords and Bing to give you an idea of how much a click can cost if you've got deep pockets.

The Most Expensive Keywords in Google AdWords

As Google owns the largest paid search platform, we’ll focus on AdWords first.

How much does AdWords cost most expensive keywords Google

Listed below are the most expensive keyword categories in Google AdWords, and the average cost-per-click of each. It’s worth noting that these are keyword categories, not actual keywords themselves – in some cases, the CPCs of keywords within each category may be higher than the averages stated:

  1. Insurance - $54.91
  2. Loans - $44.28
  3. Mortgage - $47.12
  4. Attorney - $47.07
  5. Credit - $36.06
  6. Lawyer - $42.51
  7. Donate - $42.02
  8. Degree - $40.61
  9. Hosting - $31.91
  10. Claim - $45.51
  11. Conference call - $42.05
  12. Trading - $33.19
  13. Software - $35.29
  14. Recovery - $42.03
  15. Transfer - $29.86
  16. Gas/Electricity - $54.62
  17. Classes - $35.04
  18. Rehab - $33.59
  19. Treatment - $37.18
  20. Cord blood - $27.80

You can check out the full infographic and learn about the methodology behind the data here.

The Most Expensive Keywords in Bing Ads

As Bing is growing in market share, we decided to conduct a similar study to find the most expensive keywords in Bing Ads.

How much does AdWords cost most expensive keywords Bing Ads

Listed below are the most expensive keyword categories in Bing Ads, as well as the average cost-per-click for each:

  1. Lawyers - $109.21
  2. Attorney - $101.77
  3. Structured settlements - $78.39
  4. DUI - $69.56
  5. Mesothelioma - $68.95
  6. Treatment - $67.46
  7. Annuity - $67.31
  8. MBA - $62.78
  9. Phone - $53.94
  10. Insurance - $53.14
  11. Diploma - $52.73
  12. Rehab - $49.67
  13. Cloud - $49.52
  14. Accounting - $44.82
  15. Exterminator - $44.66
  16. Mobile - $43.04
  17. Business - $40.75
  18. Repair - $39.80
  19. Plumber - $36.97
  20. Podiatry - $29.89

You can see the full infographic and the category breakdown here.

Of course, these are just some of the hundreds of thousands of keywords that businesses all over the world are bidding on, and costs can vary widely depending on a wide range of factors. Even if you’re in an industry with high average costs-per-click, such as insurance or legal services, it doesn’t necessarily mean you’ll be forced to pay these amounts for each click on your ad.

Furthermore, it's important to take ROI into account. These industries can afford high CPC's because the average lifetime value of a customer is so high.

Long-Tail Keywords

People sometimes like to point at the grand, show-stopping keyword categories above as a definitive example of how expensive PPC can be. The reality, however, is that these keyword categories only make up a small portion of total search volumes. Long-tail keywords actually account for the majority of Web searches.

How much does AdWords cost long tail keywords

Let’s take another look at the list from Bing Ads above. See the keyword category “Exterminator”? This category has an average CPC of $44.66. While some users may indeed perform a search for “exterminator [their town]” if they discover their house is infested with pests, other users may opt for a different approach – one that yields opportunities for the smart advertiser.

What if someone performed a search for the long-tail query, “How to get ants out of my kitchen”? They could be looking for do-it-yourself advice on how to rid their kitchen of ants, but they might also be open to seeing an ad for an exterminator (and if you’ve ever tried to keep ants out of a kitchen, this scenario suddenly becomes a lot more plausible).

This is the kind of opportunity that long-tail keyword targeting presents to advertisers. In addition to making up the vast majority of searches, long-tail keywords are also often significantly cheaper than shorter keyword-rich queries and can have as much – if not more – commercial intent.

Learn more about long-tail keywords in this guide.

How Much Do Typical Businesses Spend on PPC?

Usually, once someone has asked about the average cost-per-click of a PPC ad, their next question will be how much do “typical” businesses spend. Unfortunately, this is another question without an easy answer. However, that doesn’t mean I can’t tell you a little bit more about how much a “typical” business spends on paid search. First, we need to look at overall spend data by industry.

If you look at the average CPC data above, you’ll see that the most competitive terms are found in the insurance, financial services, and legal industries. WordStream looked into the overall spend of these and other industry verticals, and we saw there was a degree of overlap between the average CPC of a keyword category and the total spend in that industry:

How much does AdWords cost total spend by industry

As you can see, companies in the financial and insurance sectors spend the most by a significant margin ($1.2 billion), with retailers coming in second. Individual companies in these industries often spend $40 to $50 million a year on Google AdWords. For example, Amazon spends over $50 million per year. Clearly, they're getting good ROI on that spend!

Of course, this data is interesting, but it’s not terribly useful to a would-be advertiser who’s still on the fence about AdWords. For one, a handful of major brands dominated each individual category – businesses that likely bear little resemblance to those who are considering getting started in AdWords (check out the full infographic here). The remaining $14 billion that makes up Google's ad revenue comes from a number of smaller businesses with smaller budgets. You don't need to spend millions on AdWords to make it work!

How Much Do Small Businesses Spend on AdWords?

With this in mind, I asked Erin Sagin, one of WordStream’s Customer Success Managers, about how much the average WordStream client spends on PPC per month.

As you might expect, Erin told me that the amount that our clients spend on PPC varies widely. Some only spend around $1,000 per month (and I say “only” purely for the purposes of context – that’s still a lot of money to many small businesses), whereas others spend upward of $30,000 per month, such as PPC management agencies.

However, Erin told me that the average WordStream client (mostly small and medium-sized businesses) spends $9,813 per month on PPC advertising. This average is derived from the entirety of WordStream’s client base, including the very smallest mom-and-pop businesses right through to mid-sized PPC management agencies.

Overall, the average CPC of keywords across all industries typically ranges between $1-2 – significantly less than the averages from AdWords and Bing listed above.

What Other Costs Are Involved in PPC?

Your ad budget will always be the largest, most direct cost associated with your PPC campaigns. However, while your ad budget is important, it’s not necessarily the be-all and end-all of your paid search efforts. There are other potential costs you may have to consider, depending on your business, marketing goals, and individual situation.

Agency Costs

Some small businesses opt to have an agency handle their PPC work for them. This approach offers several benefits, such as minimal personal investment of time and effort in actually managing your PPC account. Agencies can also boast many years of experience in PPC account management, making them trustworthy partners who can offer expert advice and guidance.

How much does AdWords cost Mad Men agency

Just another glamorous day at a PPC agency.

However, agencies don’t come cheap. Even smaller boutique agencies will take a percentage of your ad spend, regardless of ROI. Some agencies may guarantee a threshold ROI, whereas others won’t. Agency cuts typically hover around the 10% mark, though this varies from one agency to another.

Obviously it’s in the agency’s best interests to deliver results (to reduce churn and retain clients), but even if your ads don’t result in any conversions, you’ll still have to pony up and pay your agency unless it’s explicitly stated otherwise in your contract.

PPC Management Software

AdWords is a great advertising platform. It offers advertisers a high degree of control over the precise variables in their accounts, and can be extremely powerful in the right hands. The biggest complaint we hear from our clients is that, for all its power, AdWords can be intimidating – especially to new advertisers. That’s why many businesses opt to use PPC management software.

How much does AdWords cost PPC management software

Some business owners opt to manage their PPC accounts manually, and I get that. Times are tough, and every penny counts. However, if you’re pushed for time or aren’t sure what you’re doing (or both), investing in PPC management software is a great way to save time, reduce costly mistakes, and get on with actually running your business.

PPC software (like WordStream Advisor) is typically licensed, rather than purchased. This means that if you want to use software to manage and automate the legwork in your AdWords account, you’ll need to factor in subscription costs. WordStream offers six- and 12-month contracts as well as an annual prepaid option, which makes budgeting for PPC software easy, but if you’re looking at another platform, be sure to understand the terms of the contract before you sign anything.

The Price Is Right

As I’ve stated throughout, there are numerous factors that can have a significant impact on the cost of running a PPC campaign, but remember: almost any type of business can make AdWords work for them! If you’re not sure about anything I’ve covered in this guide, or you have specific questions, leave a comment and we’ll answer them as best we can.

 

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Comments

Tanveer Anjum
May 21, 2015

niceeeeeeeeeeeeeeeeeeee

Dan Shewan
May 22, 2015

/fistbump

John
May 22, 2015

Very good article....it helps me set up price.

Dan Shewan
May 22, 2015

Glad you found it useful, John!

Viren
May 23, 2015

Good stuff

Rahul
May 24, 2015

I was searching about Google adwords and i'm Glad that i landed here. You have shared A-Z information about Google Adwords. Now i can plan of advertising effectively. Thanks

Citra
May 24, 2015

This is really great and nice article that I found today, and from you I learn more about Adwords. Many thanks to you.

syaikal
May 27, 2015

nice info!!

Ronnie Greenaway
Jun 02, 2015

I can't believe you gave us all this great information for free. I'm gonna use it to get paid so thank you!

Elisa Gabbert
Jun 02, 2015

Haha, glad you found it useful!

Lemuel
Dec 05, 2015

In other words, not all videos go viral organically - there clearly was a
solution to the insanity.

Mazahar
Aug 04, 2015

Another nice post. Keep it up. Thanks!

Dan
Nov 14, 2015

I’m a big advocate of Adwords myself. But I do think many business owners make the mistake of looking at AdWords from a cost-accounting perspective – I’ll admit I once did. An interesting read I picked up this week that explains that a bit more. It looks like I can't post links here but it's called "Your ROI from AdWords is Higher Than You Think" and it's written by David Deppner if you want to look it up. It doesn’t go into the nitty gritty of how much AdWords costs or how much you should spend, specifically, but it does a great job of explaining how to realize and calculate your actual ROI from a business perspective.

Tahir Marfani
Nov 18, 2015

Great Stuff !!

Alex
Nov 18, 2015

1) Not sure that business spending 100K on advertising alone qualifies as a "small business
2) There is no tool for monthly budget in Adwords. Only a daily budget.

Jon
Jan 12, 2016

Thanks for a such great information. Starting a new business and it is very hard to find information. There are many things I have to find out on my own and this kind of information is really helpful. Thanks again!

Rod Salm
Jan 12, 2016

Great round up of information to form the questions I need to ask at my next SEM manager meeting.

What do you think of hourly rates by agencies for campaign management vs. percent of spend?

Rod Salm

Wilfredo
Jul 17, 2016

Spot on with this write-up, I actually think
thiss website needs a great deal more attention. I'll probably bee
back again to reasd more, thanks for the information!

KrystenKWeis
Sep 24, 2016

Hi! I'm at work surfing around your blog from my new apple iphone!
Just wanted to say I love reading through your blog and look forward to all your posts!
Carry on the excellent work!

GSitts
Jan 21, 2016

Good article.I am one who gave up on AdWords, not due to cost but due to insufficient ROI. I am about to go back at it in another niche and this was a good summary of options and practices.

James
Jan 21, 2016

Re: "even if your ads don’t result in any conversions, you’ll still have to pony up and pay your agency"

Well, let's not overlook the point that an AdWords ad is typically to get a lead, not a conversion. The efficacy of a campaign is in large measure dependent on how well the business converts the lead. A mere lead is useless unless followed-up in timely fashion and handled with sales expertise. The responsibility for the conversion is the business client, and not the PPC agency.

Sheri
Feb 07, 2016

Can you please say how much is the least primary budget for the first campaign with the amount of 220cent CPC?

Naveen Reddy
Feb 13, 2016

if i pay to google ads how much it costs for monthly.

please let me know by email.

Thank you

Kris
Apr 01, 2016

Hey mate, I'm trying to work out this google adword. I don't want to spend big bucks so was looking at$100 per week. The CPC has thrown me a bit. If I want to spend $100 per week is that the total cost with no hidden extra's?
Cheers

Raghav Tripathi
May 04, 2016

Any Fixed cost ? One Month Total Cost?

Ankita
May 17, 2016

Really very good information for me

Haley Deggan
May 26, 2016

Do I need to build my keywords in order for google to link peoples searches to my ads?

What would happen, for example, if I didn't put any keywords in the keyword box?

When I search for keywords they come up with a certain suggest bid/amount. Do I need to match the amount in my CPC.

For example. if I search "Hotel" and it comes up as $3.00, do I need to make my CPC 3.00?

Thank you!

Heather
Jun 03, 2016

This was really helpful information explained quite clearly. Thanks for sharing this resource.

Rual Raise
Jun 08, 2016

Great stuff you have shared i am going to start google add soon it will be very helpful for me.

Whatsapp Status
Jun 20, 2016

Hello,

One of the most beautiful and useful article i came across today.

Thank you so much for sharing article.

JR
Jun 24, 2016

More proof that the obscene costs Google is extorting from businesses needs to regulated. What a ripoff this company is. Avoid Google like the plague that it is.

Kathleen Mahall
Jun 30, 2016

Is there an adword for Republican delegates to the Republican Convention?

Stephanie Sheehan
Jul 17, 2016

Excellent Article

Liron
Aug 03, 2016

Hi

I'm a newbie to online marketing so I wanted to make sure I understand the numbers here..

Assuming a 1$ CPC, and adding an average 5% conversion rate from click to buy, I'll need to pay for 20 clicks before getting to a purchase. This means ~20$ per unit sold are spent on adwords.

This excludes a whole range of products from being advertised via Adwords right? (basically any product with profit before ad spend that is below 20$ is not practical - and most of these products need to be in the 60-100$ retail price range..)

Am I correct? is 5% conversion rate considered too low?

Thanks in advance
Liron

HowTolk
Sep 07, 2016

Wow ! That was an excellent article.You have spent lot of effort to write such a good article.Thank you keep it up.

Hello
Nov 01, 2016

EXCELLENT ARTICLE

violetta wong
Nov 24, 2016

excellent articles

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