Google Ads Pricing: How To Set a Google Ads Budget

Google accounts for around 90% of the global search engine market, which means that Google Ads is vital for just about any ecommerce business. Used properly, it can help your company get in front of search users and, ultimately, find customers.

But smart advertising requires understanding costs. Here’s what you need to know about the Google Ads pricing structure and how to get the most from your ad spend.

Factors that affect the price of Google Ads

• Quality score
• Max bid
• Ad rank
• Competitor bids
• Search context

Google Ads determines your price via an ad auction process that considers the following variables:

Quality score

The first and broadest factor in Google advertising costs is the quality score that Google assigns to your ad, a figure the platform calculates based on variables including the keywords you’re targeting, the relevance of the ad to the search query, the quality and relevance of the landing page, and the projected click-through rate on the ad. Google doesn’t share exactly how the quality score is calculated, but it’s scored on a scale of 1 to 10 and is used, in turn, to calculate the ad’s ad rank at auction time. (More on that metric below.)

Max bid

Your max bid is the maximum amount you agree to pay for a click. While you will typically pay less than your max, it’s the ceiling you set for how much Google Ads can charge you for a single click. You can also set a daily and monthly spending limit. Google guarantees that your monthly Google Ads spend will never exceed the limit.

Ad rank

Google Ads multiplies your max bid by your quality score to calculate your ad rank. Your ad rank often must be above a certain level for your ad to appear at the top of the search engine results page (SERP) above the regular search results. Generally speaking, ads with higher quality scores cost less to maintain a high SERP position.

Competitor bids

The competitiveness of the search terms you target contributes to the cost of your ads. While the average cost per click (CPC) for ecommerce brands is a little over $1, according to PPC tool WordStream, that cost can rise for highly competitive products. In certain specialized industries, such as legal services, insurance, and credit cards, keywords tend to be more competitive and thus more expensive. CPC figures climb in these industries because the customer lifetime value (CLV) of a single customer is particularly high, too. 

Search context

Basic facts about the user’s search query—including the specific keywords used, the user’s location, the device they’re on, and the time of day they’re searching—will also play a role in determining your actual CPC.

3 ways to set your Google Ads budget

1. Prioritize visibility
2. Prioritize clicks
3. Prioritize conversions

Structuring your Google Ads budget comes down to what you want your Google Ads campaigns to accomplish. A campaign designed to build broad awareness for your brand is going to look very different from one with a more specific goal, like increasing sales of a particular product. The former might simply maximize clicks to a landing page within a daily average budget. The latter might use the more involved process of manual bidding, using performance data to allocate more of your daily ad budget to the keywords or ad placements that lead to conversion.

Your Google Ads account offers the option to prioritize three basic focus areas: 

1. Prioritize visibility

If your campaign is focused on visibility, Google Ads will guide you toward strategies optimized for impressions. These include target impression share—where the system automatically bids to help your ad achieve a certain ad placement in search results (usually near the top of the page)—and target cost-per-thousand impressions (tCPM), where you set an average amount you’re willing to pay for 1,000 impressions. 

2. Prioritize clicks

If your campaign is focused on clicks, Google Ads will recommend its foundational CPC smart bidding strategy, which aims to maximize clicks. You set an average daily budget, and the system tries to get as many clicks as it can; simple as that. Targeting CPC and manual CPC bidding, in that order, gives you more control over the campaign. 

3. Prioritize conversions

If your campaign is focused on conversions, Google Ads will point you toward smart bidding strategies like maximizing conversions. This strategy works similarly to maximizing clicks, but instead targets next-step actions like users signing up for a newsletter or downloading an app. Another option is target cost per action (tCPA), which lets you set an average amount you’re willing to pay to encourage a user to perform a certain action.

Strategies to optimize Google Ads pricing

• Employ negative keywords
• Target long-tail keywords
• Use shared budgets
• Leverage device targeting

Experiment with the following campaign settings to get the most out of your Google Ads spend:

Employ negative keywords 

Negative keywords are search terms that you can instruct Google Ads not to use to target your ads. If you sell high-end running shoes, for instance, you might add “cheap running shoes” and “used running shoes” as negative keywords to filter out irrelevant searches. Regularly reviewing and adding to your negative keywords can help you improve your quality score and, therefore, the overall efficiency of your Google Ads budget. 

Target long-tail keywords 

Google also recommends exploring long-tail keywords, those using three or more words. Since they’re longer and more specific, they tend to have lower search volume overall, which allows them to better target certain customers while costing less per click. For example, if your brand makes high-end running shoes, you might target long-tail keywords like “stylish running shoes” and “running shoes you can wear to work.”

Use shared budgets

If you have multiple campaigns you’d like to run simultaneously, consider using a shared budget. For example, if Campaign A is underperforming on a Monday, then $65 of your $100 shared budget might go to Campaign B that day instead. If Campaign A turns around and starts performing better than Campaign B, the budget would tilt back toward the first campaign. Shared budgets help you account for variability in how users search.

Leverage device targeting 

Google Ads lets you customize your campaigns based on the device used for the search query. If you notice that you get considerably more conversions from desktop users than mobile users, you can set an automatic bid adjustment to reallocate your Google Ads budget to target those users accordingly.