There are many times as a seasoned digital marketer I find myself asking how come I have spent so much money on Google Ads this month or week.
In order for me to solve the problem of where my budget went, I usually rush to the keywords and see which of them is misbehaving. When I find the culprit(s) I immediately take action to see what made it go so high. Although there are times I can’t find out why and hence I came up with this blog post to help other digital consultants to find out why their costs of Google has gone up.
How it works
This section is mainly for beginners. Google ads is based on a pay per click model and in its terminology cost per click (CPC). As a marketer you decide how much you are willing to pay for a click.
For ad to be shown it has to go through the ad auction. The ad auction simply put is when a searcher types certain phrases and Google matches them to keywords in which advertisers are bidding on. Ads then appear depending on the advertisers’ keywords.
Here are the things the drive up or lower the cost of Google Ads:
- Ad Scheduling
- Device Targeting
- Digital Marketing Agency costs
- Third Party Tools
- Production Costs
Google gives you the option of choosing a bidding strategy that depends on your goals. Your goals could be to increase conversions, if you want people to do something on your website; to get people to your website, for blogs; people to see your videos or banner ads. These goals are mainly conversions, clicks and impressions.
Bidding for conversions
This strategy is called Cost Per Acquisition (CPA) bidding. It’s when the CPA bids is set and the Google Ads system tries to get for you as many conversions within the set budget.
Bidding For clicks
Also known as CPC bidding. It is used when you want to drive traffic to your website. This option is used mostly for better control of the amount of money that is spent. This is because different Keyword bids can be adjusted anytime
Bidding For Impressions.
This is referred to as Cost Per Mille (CPM) bidding. This is mostly for the display network campaigns and YouTube video ads. Its main purpose is to have your ads seen as many times as possible on different websites and YouTube.
Your bidding strategy will determine how much you will spend on Google. Bidding for clicks and conversions in most cases turns out to be more expensive than bidding for impression for banner ads and YouTube videos.
Ad scheduling is used to specify the time you want ads to appear during the day. This comes in handy if you are running a 9 – 5 business and you want your ads to be shown during those hours.
It’s also applicable if you see that you are getting most of your clicks at certain times and you want to maximize returns in that period.
Google Ads lets your modify your bids according to the Ad scheduling. For example, if you are getting more sales at 10:00 AM, you can modifier your bids by 20% and end up paying 120% of your original CPC. This in turn increases your overall Google Ads Costs.
Like Ad scheduling bid modifiers, Location biding lets you set your clicks to be seen more in certain areas as opposed to others. This applies if your business is operating in a certain geography and you notice there are neighbourhoods or cities that are more profitable than others. You may want to increase the bids in those cities while reducing them on cities that aren’t doing so well.
Like the other two bid modifiers mentioned above, bids can be increased or decreased based on mobile, desktop, tablet and until recently TV.
Traffic to your website is not what it used to be because these days we have phones and tablets bring in traffic more than desktop computers.
As a business owner you should leverage the amount of time spent on phones and see how best to get attention there. This will result in increasing your budget spent on phones by some percentage.
Although most traffic is from mobile, you should evaluate the conversion value between mobile and desktop. There are times when desktop sales are more valuable than mobile. In such regards, then desktop bids should be increased by a fraction.
When it comes to Google Search ads, keywords are very important in determining how much you will pay. Keywords are used to determine how much you will pay for each click on the ad auction. Keywords are used to match searches and determine which ads will be shown. From here Google will say how much you would pay for the CPC.
Here are some ways that Google will determine your cost per click
- Expensive Keywords
The average amount paid for CPC is $1-2 across the board. Although, there are many keywords that go north of $100 per click. These keywords are mainly from industries that are very competitive for example gambling.
- Long-Tail Keywords
These keywords tend to be much cheaper than shorter keywords. The reason being that not many people on the internet aren’t using them. For example the keyword “exterminator” goes for $44.66 per click, alternatively when you use different keywords searching for the same service the cpc will be cheaper e.g. “Getting rid of insects from my home” which goes for $1.5
The irony is that, long tail keywords make a bulk of the web searches. They are also more profitable in that they get more conversions than the generic searches. Hence it would be advisable to use these keywords when you are trying to lower the cost of keywords.
There are four different match types for keywords namely: broad match, broad match modifier, phrase match and exact match. From my experience, exact-match keywords which align more to the user’s searches get more conversions but they are more expensive. The opposite is true with broad match keywords.
- Negative Keywords
These are keywords that instruct Google not show your ads when certain words appear. These words are like free, download or course depending on your industry obviously. They are important to use as they not only because they save a lot of money for you but also they improve your account settings.
- Quality score
Google ranks the effectiveness of your keywords with a score from 1-10. Keywords with a great quality score are ranked 10 while the poor ones have a ranking of 1. This ranking matters a lot because if a keyword has a QS of 10 it means that the advertiser will be charged 50% less of their bid. While they will be charged 50% more if the keyword has a rank of 1
QS is important in determining which position an ad will be on the auction. If an ad is in position 1 it means that it has a great QS and it is also saving the advertiser.
Unlike all other factors that I have mentioned before, digital agency costs work outside the Google Ads ecosystem. You may find as a business you don’t have the time, or man power to manage your own Google Ads campaigns. This leads to you having to outsource your work to a digital marketing agency.
The digital marketing agency is an added benefit because it comes with a lot of industry experience and specialists in Google Ads. The agency will be having employees who are Google Certified partners. With the agency can provide your business incredible results. These results couldn’t have been gotten in house.
After providing you with results, the agency will require payment for its work. Depending on your agreement you had with the company, it is normally 10 – 20% of ad spend. In total, your company will be investing 120% to get results.
PPC Management Software
Some business managers might not have the extra budget to hire a digital marketing agency or a consultant to help with their online campaigns. Also these individuals don’t have the required knowledge to manage Google Ads effectively. This is when they opt to use third party software to manage their Google Ads account.
There are many websites out there that help people manage their Google Ads accounts. For example, at the top of my head is Optmyzr, which tracks the performance of a campaign and suggests a few actionable insights. These third party tools are heaven sent for a person who doesn’t have time to manage his or her Ads campaigns.
Other than business managers who don’t have time to manage their Google ads accounts, season Google Ads managers also use third party tools. This is mainly because they handle huge accounts that have thousands of campaigns and they don’t have time to go through each campaign. They need the help of automation to stay on top of their accounts.
Optmyzer and other third party softwares normally have monthly subscription fees that add on to the cost of running Google ads. As of this writing, I am paying for $249/m option
Creating highly attractive banners requires outside help. Unless you are lucky to have very good graphic designers in-house. Graphic designers are needed to create display ads to which will encourage web surfers to click on the ads.
If you will be advertising on YouTube, you will need a whole production team to come up with video ads. It is safe to assume that many business don’t have video production departments. The video producers are going to be outsourced adding on to the total cost of digital marketing campaign.
Lastly, competition will be the cause of additional Google Ads cost. Due to Google’s ad rank system, you as an advertiser will be paying $0.01 more of the amount that is needed to appear above your competition. This becomes a problem if you are competing with companies that have a huge budget or someone somewhere who has messed up and causes your CPC to rise.
I have seen cases where the CPC was $0.5 to hold position 1 and after a few days the CPC was raised to $20. Upon thorough investigation, I found out the cause for the price hike was introduction of a competitor.
All these factors contribute to the total you have to pay in your Google ads cost. Click here for us to help you to manage your Google Ads account to give you a better return on your investment.