Google Adwords Cost - A Quick Guide to How it Works

by Laura Wootton on 15-Nov-2013 12:01:00

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Do you currently use traditional forms of advertising to promote your business message, but want something cheaper? Do you long for a less time-consuming option without restricting price lists and rates? This advertising ideal is now very achievable with Google Adwords.

So how does it work?

Google Adwords is successful because it only shows highly relevant and effective business ads, so they improve results using a PPC (pay per click) system. PPC means that you pay only when someone clicks on your Google ad. The amount of money you put into your campaign budget, and the amount you bid for clicks is up to you. This will, however, affect where your ads rank in the search results and how often they are shown.
The main advantages of using Adwords PPC to manage advertising costs are:

You choose where and when to spend your money
There is no minimum or maximum amount to spend on your campaigns
You can change your budget whenever you want – no contracts!

Reports on your ad costs and billing history are available at any time

Once you have set up your campaign and written your ads for specific pages of your website, it’s time to decide on your method of bidding for a position in the search rankings. Google will assess these bids in a virtual “auction” every time someone does a keyword search, to determine where exactly your ads will be shown.

To get the most value out of your bid spend, CLICK HERE to get a free “Profitable Website” report. It will advise you how to turn more ad clicks into paying customers.

Here are your options for bidding on Adwords:

Option 1: CPC

This means cost per click (based on PPC) and is the most common and highly recommended Adwords bidding method. If you drive specific target customers to your website, it is a very cost effective way to manage your ad budget, as you will only pay when people click on your ad. This isn’t as cost effective if you expect high volumes of traffic on a daily basis.

Option 2: CPM

The CPM (cost per thousand impressions) bidding method is only used for the Display Network. This is because you are shown more often on any related websites that display AdSense ads. If you sell a mainstream, attention-grabbing product or service and want maximum exposure, this is the bidding type for you.

Option 3: CPA

CPA means cost per acquisition. You can only start CPA bidding if you have conversion tracking in place, because it gives you a total cost for winning each sale/conversion. This method is recommended for experienced Google Adwords users who want to monitor sign-ups, sales and return on investment (ROI) in depth.

Now you know how Adwords PPC works and what other bid options you can choose from, you are probably wondering exactly what to set as your cost per click. This might sound like a hassle, but you can easily alter your cost per click based on ad performance and budget changes through Google Adwords’ automated auction system.

Setting your Adwords PPC spend

CPC (cost per click) is the simplest and most common example to use here. To enter the competitive bidding arena for ad clicks, simply follow these steps:

1. Set your monthly campaign budget –

You should set it to at least £200 per month to see quicker return on investment, but this can vary depending on your business niche and expected monthly website traffic.

2. Work out your daily budget -

Divide your monthly budget by 30 to arrive at a sensible daily budget. The important rule here is to always bid for ad rankings well within this figure, although Google Adwords regulates this using the maximum CPC metric.

3. Set your maximum CPC –

To ensure you don’t exceed your daily budget, you can easily enter a maximum CPC for each keyword bid. For example if you set it to £1 (on a £7 per day budget), you will pay no more than £1 when someone clicks on one of your ads. Your CPC will often be less than this (known as your actual CPC), depending on:

What your competitors are paying
How relevant and closely matched your keywords, ads and landing pages are

How much you should spend on Adwords

Many business owners who want to know the cost of Adwords are unsure exactly what their cost per click should be, and how it will affect their campaign. This is where Adwords’ auctioning system comes into play.

When you add a keyword search term for an ad, you will be given a minimum bid price to get onto page one of the search term. Bid prices are usually between 4p and £4, depending on keyword competitiveness. As long as the price is safely within your daily budget and doesn’t exceed your chosen maximum CPC, you can bid any amount to affect your ad position in the rankings – for that keyword.

Tip: If you want to get higher in the search rankings on for keywords that exceed your maximum CPC, you don’t always have to raise your bids. Optimising keyword, ad and landing page relevance allows you to climb the rankings ladder and pay less per click.

So there you have it; a simple guide to the workings of Google Adwords costing’s. As long as you know your target market, you can adjust your bid investments in all areas of your campaign to dramatic effect, making it a major factor in the acquisition of more valuable customers. Google Adwords PPC really is the most cost-effective business advertising solution for the future.