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Calculate Your Google Ads Cost [2020]: Is Google Ads Profitable for Your Business?

Many things have been said about Google Ads (formerly known as Google Adwords), both good and bad. But… How much should you keep for Google Ads cost?

It’s been recognized as a great place to bring quality traffic, leads and sales to your business. However, a lot of people have heard many failure stories from all types of businesses when they tried advertising on Google.

For this reason, it’s appropriate to ask yourself a few questions: Are Google Ads right for my business? How do I know if Google Ads will be profitable for my business? How can I calculate how much Google Ads will cost?

Throughout this post, these questions will be answered to help you make a decision about Google Ads. 

How do I know if Google Ads will work for my business?

The most important question to ask: is Google Ads right for your business? Let’s do some research and discover this for you in just a few steps:

Can your business afford the costs of Google Ads? 

A great way to figure this out is by investigating the average cost per click, click through rate and conversion rates for your industry. This will help you estimate how much you’d need to invest on Google Ads and what returns to expect from the costs associated.

In the following table you can check data provided by Google on the average CPCs and CTRs of various industries:

IndustryAverage CPC ($)Average CTR (%)

Travel and Tourism

$16.1%
Real Estate$0.98.3%
Finance$3.37.4%
Health$1.55.1%
Ecommerce$8.82.3%
Software$1.95.6%
Legal$4.14.7%
Education$3.25%
Retailers$0.2

24.2%

 

For the conversion rate, you can use the rates of your own business from your own website

With this information you can calculate how many clicks you need to generate one conversion, and how much you will need to spend per conversion. Also if you have your average conversion and lifetime value on hand, you’ll be able to make more accurate calculations of your Google Ads cost.

Of course the result you get is just an estimation and depends on many other factors, but you’ll have a good starting point for making your decision. 

Further on in this article we will cover how to estimate your Google Ads cost more precisely. 

What about Google Ads in terms of time and knowledge? 

Creating and continually optimizing your Google Ads is very time-consuming. Depending on the size of your website and the amount of pages you want to advertise, it can take weeks to have your Google Ads account set up and ready to go. 

There are also daily, weekly and monthly Google Ads optimization tasks to perform. This can be adjusting bids, testing ad copies, searching for long-tail keywords, creating negative search terms, creating new ads, and more.

Does your business have the resources in terms of time and knowledge to complete these tasks? And how expensive would it be to hire someone to do it for you?

Fortunately, there are free tools that can help you with all of this. At Clever Ads, we’ve developed a Google Ads Creator that automatically generates your Google Ads campaigns along with a Google Ads Audit that helps you optimize your campaigns efficiently. The amount of time and knowledge you possess won’t be an obstacle for advertising your business on Google

Are there people searching for your business and what it offers on Google? 

Another way to know if Google Ads is right for your business and whether or not you can afford it, is to figure out how big your audience is on Google.

The best way to do this is through an in depth keyword research. If there are only a few people searching for your keywords every month, then the Google Ads cost to reach them might not be worth it. 

You can use the Clever Ads free keyword planner to search for keywords related to your business. Enter specific keywords and check the search volume associated with those keywords to find what fits best for you. 

If you can’t find keywords related to your business with a search volume higher than a few hundred, Google Ads will most likely not be the best strategy for you to boost your sales.

Are your competitors investing in Google Ads? 

If your competitors are investing in Google Ads, the chances are that they are receiving benefit from them. If they are generating profitable sales through Google Ads, you’ll find that this will probably be the case for you as well. 

You can test this by going to Google and searching for the keywords that are of interest to you. Are your competitors ads appearing on top of Google search results? If so, there is a high chance that they are driving sales, and you can too.

If you’re still unsure if Google Ads are right for you, take a chance and test the waters. If you start out with a limited budget of around $100 and track that investment, you’ll be able to make a decision quite easily.

How can you calculate the cost of Google Ads for your business?

As it was pointed out in the previous section, the cost of Google Ads varies per business and industry.  

Keywords in some industries can be very expensive, while there are others where keywords are extremely cheap. Also, high-volume keywords with a lot of searches are very competitive, thus more expensive.

One of the best ways to calculate your Google Ads cost is by researching the keywords that your business is likely to target

Calculating your Google Ads cost with keyword research

You can go to Clever Ads Free Keyword Planner and start searching for keywords related to your business. You can also enter your URL directly and receive valuable keyword ideas based on your business website. 

Write down some of the keywords in a single spreadsheet with their search volume and average CPC. After that, check the table from the previous section that shows the average CTR for your industry

If you don’t see your industry reflected in that table, you can use 1.91% (the average CTR across all industries on Google Ads according to WordPress).

With this information, you can use the following formula to see how many clicks per month you’d get for each of the keywords you selected:

Keyword Search Volume * Average CTR for your industry = Monthly Clicks

And then:

Clicks per month * CPC = Monthly Cost

Multiplying the monthly clicks by the cost per click allows you to calculate the monthly cost of each keyword and get an idea of your business’ monthly Google Ads cost.

Cover your Google Ads cost by reallocating your business budget

If Google Ads is out of your budget, you can consider adjusting part of your budget out of labor costs or trading advertising platforms, or simply cutting other expenses.

Google Ads doesn’t only take money, but also a fair amount of time. Time being one of the most highly valuable assets. 

Let’s say you are spending 45 hours per month on managing your social media marketing campaigns. You can either:

  • Cut your social media advertising spend: by stopping some underperforming campaigns, lowering your budget, and reinvesting this money into other advertising platforms like Google Ads.
  • Cut the time you spend on managing your social media marketing: for example, investing 25 hours a month instead of 45.

Multiply your hourly rate or the hourly rate of the employee managing your social media campaigns by the 8 extra hours you spend per month. If you suppose this hourly rate is $55, you would save $900 by investing on Google Ads per month. 

You can start small when setting your Google Ads cost

You don’t need to target tons of Google Ads keywords or create huge campaigns when starting off. You can start by bidding on only a few keywords, or which of them you think will be more cost effective. 

In some cases you only need less than $100 in Google Ads spend to start advertising.

You don’t need a big budget to run Google Ads. The key to Google Ads is to start small and adjust your budget according to your performance.

What’s really important is to have your conversion tracking properly set up so you keep track of your profitability. That’s another great thing about Google Ads – everything’s measurable. 

You will always know how much you are spending and which keywords and campaigns present the most revenue. This way you have information about which campaigns are profitable and which ones are underperforming, making it so you know exactly how to balance your budget to get the best ROI

That’s all we have for you, now it’s time for you to make all the calculations you need to estimate your Google Ads cost and decide if you want to go for it!

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