How much do Google ads cost? How do I lower the ad cost?

July 07, 2020

This is an important question asked by most people as they consider the viability of Google Ads as their prime advertising platform.

Despite being an honest question it still lacks depth and therefore cannot get a straight answer.

For instance, the question could have specified what industry it pertains to. In which case, industry-specific average costs could have been provided for your reference.

In this case, I would lie to you if I were to divulge a figure and say that this is the cost.

Further, Google ADs costs are variable as they are dependant on a lot of factors affecting the actual cost of advertising on the platform.

Having said this, the short answer to the first part of the question is there is no fixed ad cost. However, even this answer needs justification as to why there are no fixed costs.

The second part of the question is genius in that it forces the answer to delve deep into how costs are determined on the platform as we seek ways to lower costs and increase your Ad Quality.

With these views in mind, I will try my best to answer both questions in tandem, with an introspect into the workings of the Google Ads Auction system using the most basic layman's terms.

Google Ads Auction System

The Google Ads platform works on an auction system in which space is sold to advertisers for a specific search term.

It works much like our normal auction systems, with bids except the Google Auction system is much more concerned with providing space to the advertiser whose adverts are much more relevant to the search term provided.

In fact, it works with the Ad Rank metric which is used to examine the quality of a bid before the 'space' is sold to the winning bidder. Which means the advertiser whose Ad Rank is higher gets to 'buy' the 'space'.

"Google Ads determines which ads should show with a lightning-fast ad auction, which takes place every time someone searches on Google or visits a site that shows ads." [Google Support]

Having said this we have now established why, the short answer to the first part of the question concerning how much Google AD costs, is "It's not fixed".

Google Ads Costs are variable because an auction system does not press a fixed amount on Actual Cost Per Click (Actual CPC), rather it uses various factors as determined in the auction to arrive at the final Actual CPC.

Just like real-life auctions, you have to be eligible to participate in the Google Ads auction. Which brings me to my next point, Ad Rank Thresholds.

An Ad Threshold provides the minimum price for your advert. Which means that your CPC or CPV bid has to meet this reserve price for it to be placed in an auction.

Now the point to note here is that the minimum price (reserve price) is not the same for everyone participating in the auction.

Essentially each advertiser's AD Rank Threshold is calculated based on these factors:

  • AD Quality - Google takes Ad Quality seriously. In order to make sure that adverts served on the network are of high quality they measure the quality of your ads and rate them from low to high. Higher quality ads have lower AD Rank Thresholds
  • AD Position - If you are competing in an auction to be placed on top of the Search Engine Results Page (SERP) your AD Rank Threshold is higher than when the auction is to determine who gets placed on the bottom of SERP. The reasoning is simple. "The higher your advert the more likely people will see it, hence higher AD Rank Threshold"
  • User Signals & Attributes - Google also looks at audience attributes to determine the Ad Rank Threshold. Using attributes like location, device, and demographics, the reserve price is also formulated for each auction.
  • Search Topic - Ad Rand Thresholds "can vary based on the nature of the user’s search terms. For example, thresholds for wedding-related searches may be different than searches for basket-weaving classes" [Google Support]
  • Related Auctions - An Ad Rank Threshold is also influenced by other auctions for related queries (Search Terms).

Having examined this, we can conclude that its difficult to ascertain exactly how much it will cost to run Google Ads without adequate information on exactly what adverts you will be running and without the knowledge of which industry you are targeting.

Diving on to the second part of the question which I will answer in brief. We have seen that the most important factor that influences your Actual CPC is the Ad Rank. Optimizing your adverts for a better Ad Rank will significantly lower your CPC.

In order to reduce costs your optimization should focus on improving the following aspects of Ad Rank:

  • The Bid
  • Quality Score
  • Ad Extensions
  • Ad Relevancy

If you do you will reduce the cost of running your Google Ads Account.