The traditional answer, and the answer you will find in almost every article on the subject, is: “It depends.”
While this is too broad and general of an answer, it is because there are a few extremely important factors that determine your Google advertising cost.
Factors That Influence the Cost of Advertising on Google
There are a few main factors that influence the cost of your ads:
We will break down how each of these affects Google ad cost below.
Types of Google Ad Objectives and How they Affect Ad Cost
Within the Google ads platform are different objectives (goals) for you to choose from. Each goal, and each type of ad:
- Has different KPIs
- Is shown to different people based on the outcome you want
The objective you choose determines who Google shows ads to, which can drastically affect your cost.
Example: Imagine that you, a home services business owner, are starting a Google App Campaign. You have set your targeting to include people who are homeowners and are interested in home improvement.
Now imagine that Google needs to choose between two people to show your ads, both of which match your targeting. The first person is very “clicky” (clicks on a lot of ads) but never completes a lead form. The second person does not click on a lot of ads at all but tends to fill out lead forms when they do click on one.
If your objective is to get traffic to your website, Google will choose the “clicky” person to show your ad to. If your objective is to get leads, Google will choose the person most likely to convert.
Chances are, there are fewer people who are likely to convert than people who are likely to click on a website. Case in point: The smaller your pool, the more the cost rises (except in highly targeted, highly relevant campaigns, like showing an 8-month pregnant woman ad for discount diapers). Choosing the right ad objective is the first step in making sure your ad cost stays low.
Types of Ad Objectives
Awareness: Ads with the Awareness objective build top-of-mind awareness and interest in your product or service.
Consideration: Ads with the Consideration objective get people to start thinking about your business, product, or service, and look for more information about it.
Conversions: Conversion ads encourage people to carry out a specific action or purchase your product or service
How the Google Ad Auction Works and How it Affects Ad Cost
The second factor that plays into how much ads cost is the auction and your bid. Unfortunately, the advertising spot does not go to the highest bidder, and instead is presented based on ad value.
According to Google, they strive for two things when showing ads:
- Creating value for advertisers by helping them reach and get results from people in their target audiences
- Providing positive, relevant experiences for people using Google, Instagram, or Audience Network
The best way for us to do this is to hold an auction in which both interests are represented. That way, advertisers are reaching people receptive to their ads and users are seeing something they are interested in. This is different than a traditional auction because the winner is not the ad with the highest monetary bid, but the ad that creates the most overall value.
What goes into that value? Three things:
- Advertiser bid – Your monetary bid.
- Ad quality and relevance – This is based on feedback from Google users and how relevant Google thinks your ad will be to the people seeing it.
- Estimated action rates – This is calculated by how likely Google thinks a person is to complete the objective you have chosen.
During the ad auction, your ad is pitted against other similar ads, and the advertiser with the highest combination of all three gets that online real estate.
How Your Bid Can Affect Google Ad Cost
There are two ways to bid for your ads, Automatic and Manual.
With Automatic bidding, Google sets your bid for you to get the most actions for the best price. With Manual bidding, you decide what a result is worth to you. Google always encourages you to bid true to what the action is worth to you. And focus on ROI instead of the lowest cost. The higher your bid, you more access you may have to the people that matter most.
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Your Google Audience and How it Affects Google Ad Cost
The audience you choose to show your ads to have A LOT to do with your end cost. The more relevant your audience, the lower the cost. Think about it this way:
You are a home services company. You want to run an ad for a roof replacement, so you choose to target people who are interested in home improvement.
Good idea, right?
If you only select “Interested in home improvement” as a qualifier, your ads are going to be shown to EVERYBODY who has ever indicated they like home improvement. This includes people who live in apartment buildings, people who are not homeowners, people who watch HGTV because they are obsessed with watching shows about flipping houses, etc.
Now the bad news: there are more than 350 audience attributes you can select and combine, and it takes years of perfecting your technique to manipulate them into killer audiences.
Ad Quality and Google: Picky, Picky, Picky
If I were going to say you must pick two things to optimize to lower your Google advertising cost, Ad Quality would be the first on my list, followed by Audience.
Here is the thing about Google:
Google is akin to someone’s online diary. It is their personal space to catch up with what matters to them, discover new things that could matter to them, and basically escape boredom.
It is a “see” platform. People do not go there with the intent of “doing” things.
This mindset can work for or against you when it comes to your ad creative. Because it is a “see” platform, regular ad copy you might see in print of in search results will not fly, and they’ll drive your costs way up.
Your ads need to be interesting, visually appealing, and they absolutely must fit one of these criteria:
- Pique a user’s interest
- Invoke an emotion
- Jolt someone into action
An image with your logo and a headline will not do it, sorry.
How Your Industry Affects Ad Cost
Let us think about this logically. If you are selling Rolex watches, your cost per result will probably be higher than if you are selling a 30-day fitness trial. The industry you are in and the product you are selling has a lot to do with your ad cost. The folks over at FitSmallBusiness.com pretty much hit the nail on the head with this one: different industries have different ad costs
The Best Way to Lower Your Google Ad Cost? Hire Someone Who Knows How to Do It
To get the most in performance from your Google advertising, you need to ensure you work with a knowledgeable marketing partner and you need to do extensive quantitative creative testing. This is essential for user acquisition campaigns now. While the algorithms at Google may be able to test creative elements, they cannot create those elements or develop a creative strategy. They cannot do competitive analysis alone, either.
Focus on expanding your skills in those areas, specifically, being able to distill and interpret Google split testing data from creative so your team can deliver better creative, and feel free to reach out to us anytime with questions.
Read our blog post, UA Media Buying Model, and see how it works in tandem with our Ad Concept Model. Learn the media buying best practice strategies for Facebook Android, Facebook iOS SKAN, Google, and TikTok.