If you own a business, you might be wondering why Google Ads are eating up so much of your budget.
“Expensive” depends on how much profit your product or service makes. For example, if you spend $1,000 to acquire a customer that will buy a service of $25,000 dollar from you, Google ads is “cheap”.
If you sell a product for $100 and you need to spend $95 to acquire the customer, Google ads is “expensive”.
On Google you, pay per click. The more people who bid on the same keyword, the higher the price of a click. If 10 of your competitors are willing to spend $1 per click, you will have to spend more than $1 to “outbid” them.
If google ads are too expensive for you, you can do three things.
1.) Start the campaign with broad match keywords and monitor which keywords (that have a low Cost per Click) result in conversions. Then turn off google ads for keywords that are too expensive for you.
2.) Raise the prices of your products, sell more products to the same customer or only use Google Ads for products that have a higher return. Regarding the latter, it might make sense to run Google ads for your $1,000 dollar product but not for your $100 dollar product.
3.) Invest in SEO. SEO is a long term game but it can give very good results after 6-12 months. The return on investing in SEO can be much greater than investing in good ads.
Competition Drives Costs Up
Google Ads operates on an auction system. Advertisers bid on keywords, deciding how much they are willing to pay for a click on their ad.
When a user searches for a keyword, Google runs an auction to determine whose ad appears. Bidding is crucial since the highest bid often wins the top spot. However, having the highest bid isn’t the only factor.
Google considers ad relevance and the user’s experience. Advertisers must carefully manage their bids and focus on keyword selection to succeed in this system. Strong bids can help secure top ad placements.
Tip for Small Businesses: Focus on long-tail commercial keywords, those are more specific searches that fewer people bid on.
For example, if you run a local bakery in New York and bid on the keyword “bakery in New York,” you’ll be competing with dozens of other bakeries, driving up the cost. Instead, you could target “best custom cakes in Queens,” which is more specific and likely to have less competition, meaning lower costs.
High-Value Keywords Are Expensive
Certain keywords just cost more because they’re tied to products or services with high returns. For example, a lawyer might pay $50 per click because one client could bring in thousands of dollars in fees. Even if you’re in a less competitive industry, targeting high-value keywords can make your costs skyrocket.
Tip for Small Businesses: Be strategic with your keywords. You don’t need to target the most expensive ones. Instead, use a mix of affordable keywords that still bring in qualified leads.
For example: A lawyer might bid on “personal injury attorney,” which could cost $100 per click because a single client could be worth thousands of dollars in fees. But if you’re a small business selling pet products, you don’t need to compete for expensive keywords. Instead, you could target “affordable dog toys,” which costs less per click but still brings in interested buyers.
Bidding Wars Happen
Businesses can get into bidding wars over popular keywords. Some companies are willing to outbid others just to stay on top, driving up the cost per click. If a business has a larger budget, they can afford to keep raising their bids, making it tough for smaller companies to compete.
Tip for Small Businesses: Set a daily budget to control spending. That way, you won’t overspend just to compete with bigger businesses. Use bid strategies like “Maximize Clicks” or “Target CPA (cost per acquisition)” to optimize costs.
For Example: If you’re selling fitness equipment and bid on “best home gym equipment,” you might find yourself competing with large companies like Amazon or Walmart. Instead, try bidding on “adjustable dumbbells for home gyms,” where there’s less competition and lower bid prices.
Quality Score
The Quality Score measures ad relevance, click-through rate, and landing page experience. Google gives a score from 1 to 10 for each keyword. A higher score can lower the cost per click.
Quality Score affects how often and where ads appear. Having a high score can improve ad positions without needing higher bids.
Advertisers should focus on creating relevant ads and optimizing landing pages. This can improve the user’s experience, increase Quality Scores, and potentially lower costs.
A low Quality Score means you’ll pay more for each click, even if your competitors are bidding less.
Tip for Small Businesses: Improve your Quality Score by creating highly relevant ads and optimizing your landing pages. If Google sees that users like your ads and find them useful, they’ll charge you less.
Example: Let’s say you own a coffee shop and run an ad for “freshly brewed coffee in Seattle.” If your ad leads to a poorly designed website with little information about your coffee, Google will lower your Quality Score. But if your ad takes people to a clean, informative page with details on your coffee varieties and shop hours, your Quality Score improves, lowering your ad costs.
Frequently Asked Questions
Why are Google Ads so expensive?
The cost of Google Ads can vary significantly based on multiple factors. Primarily, it can be attributed to the level of competition within your target industry. When many advertisers are bidding on the same keywords, this competition drives up the cost per click (CPC). Additionally, the quality score of your ad and landing pages plays a crucial role in determining the overall cost of your campaign.
What factors contribute to the high cost of Google Ads?
Several factors can lead to higher Google Ads costs. First, competition for specific keywords is a significant driver. When many advertisers are competing for the same keywords, the bid prices will rise. Second, the relevance of your ads and the quality score assigned by Google also affects cost. Higher quality scores can lead to lower CPC, while poorly optimized ads may become more expensive. Lastly, your budget and the time zone you target can impact your cost as well.
How does competition affect Google Ads costs?
Competition among advertisers is a primary reason why Google Ads can be expensive. When many advertisers are bidding on the same keywords, they drive up the cost of clicking on your ads. This is especially true in industries with high demand, where businesses are willing to invest heavily to attract customers. Therefore, keyword research is essential to identify less competitive, more cost-effective keywords.
