Google Advertising Cost: Determining What Your Budget Needs to Be

Business owners who know they need to expand their PPC presence on Google Ads may be stumped by one key point: how to budget for those costs.

It’s understandable. Advertising on Google has always been a give and take: you need to bid on the relevant keywords for your business while still keeping your costs as low as you can.

After all, people are going to be clicking on those ads if they’re relevant, and if you’re not seeing much of an ROI on that investment, then that amounts to wasted ad dollars.

The interesting catch with PPC, though, is that your ads can appear above the ads of a business that bid more if your Quality Score is higher, meaning the ads are more relevant to the query.

You can use this to your advantage when budgeting for your Google advertising costs.

Still a little confused?

We’ll explain some strategies for budgeting below. You can also contact us here at LSEO for expert assistance with your pay-per-click campaigns.

Know Your Goals

Before you actually determine a PPC budget, you’ll need to know what you want to accomplish with your campaign.

Your goals will inform everything you do later on, and so you’ll always need to keep them in mind.

Be specific here. You need to have answers to the following questions if you want your PPC efforts to be worth it:

• How much do you want to grow through Google advertising?
• What does growth look like?
• Is that goal realistic given your current financials?
• Will you have a way to track your results over time?
• By when do you want to achieve your growth goal?

Since only you as the business owner will know the answers to these questions, you’ll need to take some time to sit and think.

For instance, getting clicks is one thing, but what do you want people to do once they get on your site? Buy something? Read your content? Just get to know you better as a company?

Your answers will help you zero in on a Google advertising budget for your business.

Know Your Cost Per Lead

Another step that comes before setting a definite Google Ads budget is to know your cost per lead (CPL).

Your CPL is simply the money you spend to get each lead in the door, whether the lead ultimately converts or not. CPL is one of the core elements of sales funnels in business.

When you’re figuring out what you’re going to budget for your Google advertising in a given year, you have to take CPL into account. Because, even though you stand to make a profit, you have to put that profit up against what you will spend to get there.

Now, here is where your answers to the questions above will come in handy.

If you know how many monthly conversions you will need to hit your growth goals, and you know how many monthly leads turn into conversions, and you know your CPL, then you know how much you’ll need to put into your PPC budget to make it happen.

Take this overly simple example to understand what I mean.

Say you want 10 conversions per month. Your Google ads normally convert 10% of leads. Your CPL is $15.

You will need to capture 100 leads every month from your ads to get those 10 conversions, or 10% of your leads.

Your budget for each month is therefore $1,500.

So that’s a really easy way to understand budgeting for paid media marketing on Google. You can see how lots of factors play into this. Those factors all come down to you and your business and what you can spend.

But that isn’t where the story ends. If you’ve figured out what you’re able to spend on your Google ads, you still need to know how to allocate that budget, and that comes down to your keyword bidding.

Allocating Google Advertising Budget for Keywords

As you probably know, in PPC, the cost per click comes down to the keywords you’re targeting. Different keywords have different costs for which you have to bid. Those costs are determined partially by the keyword’s search volume.

For example, take a seed term such as “construction companies.” It has 49,500 search volume and costs between $3.00 and $9.46 to bid on it for the top of a Google result page.

But compare those costs to a more specific, and less-searched term, such as “construction contractors.” The bids for that term range from $2.46 to $8.42.

Why? Again, because of search volumes and relevance. If almost 50,000 people a month search for a term, doesn’t it make sense that businesses would be willing to pay more to rank an ad for that term than for a term that only 8,000 people search?

It is up to you to decide what you’re willing to part with to rank your ads for these terms, but don’t just consider money.

Google has a 1-to-10 Quality Score that it assigns to each ad on its platform. Google determines the Quality Score of an ad based on:

• Expected click-through rate, or CTR
• Ad relevance (relevance to what the searcher intended to find)
• Landing page relevance (how related your website’s landing page is to the ad that took users there)

Remember that you’re paying for each click on your ad, so you want clicks to be qualified leads more than anything.

How can you optimize your Google ads for this?

You can focus on more long-tail keywords than simple seed terms. Sure, the big brands do want to rank for, and can rank for, terms such as “construction companies.”

But what does that term mean? It’s pretty broad, whereas more specific terms such as “pool builders near me” and “home remodeling near me” tell more of a story. You know what those searchers need.

In turn, you’ll have a better time building landing pages that match your ads for relevance. That’s because you’ll have an idea of who these searchers are and where they fall in the buying journey.

When you have higher Quality Scores on your ads, your CPC can be reduced.

So, do what you can with your budget, but always focus on the user above all else. Deliver incredible ad experiences for them, and you may just be rewarded.

Let LSEO Help with Your Google Advertising Budgeting

We understand that determining your Google Ads budgeting can be challenging, especially when you aren’t as in-tune with the platform as the experts.

At LSEO, we’re happy to say we are experts in Google Ads and would be happy to work with you on budgeting your Google Ads campaigns for maximum growth.

Get in touch with us anytime to tell us about what you’re working on and how we can help!