One of the questions we get asked frequently from our clients is how much money they should spend on Google Ads. It’s a common misconception that you can achieve good results only if you have a big budget to spend. The good news is that this isn’t the case and you can achieve good results even with a small budget. One of Google’s main principles is to give you full control over your spending, so you can work out how much you’re willing to invest and build a strategy around your budget.
How to work out your Google Ads budget
Ask yourself the following questions to define a suitable budget to start with:
What is the main goal for your Google Ads campaigns?
Be clear on your marketing goals, your business targets and expectations. A small budget will keep costs down but it might take some time to see results, while a larger budget can speed up the process if you’re willing to invest more. Having a goal in mind and keep your expectations realistic will help you to work out which option is the right one for you.
How many campaigns do you want to run?
Budgets in Google Ads are set per campaign and day, so the more campaigns you want to run, the higher your budget should be. Each campaign is centred around one product or service area of your business (for example, ‘womens shoes’, ‘womens accessories’ and ‘womens dresses’), so you can decide whether you want to advertise every part of your business or only selected categories.
Which campaign types do you want to use?
Google Ads has five campaign types with Search being the most common type. Search campaigns use keywords to show ads to people who search for a product or service you offer. These people are actively looking to make a purchase or need information so you want to make sure your business comes up for relevant searches.
Display and Video ads are mainly used for branding and can complement your Search campaigns. Display ads are the image ads you see on blogs, online newspapers and many other website and video ads are shown on YouTube.
Shopping ads are a great tool for ecommerce businesses to showcase their products with an image, price and offers on the Google Search results page. And lastly, Google App campaigns help you to promote your app in the App Store and Google Play.
How campaign budget impacts performance
Your budget affects the performance of your campaigns in many ways. Google Ads works on a cost-per-click (CPC) system meaning that you are only charged when someone clicks on your ads. Typically, Search campaigns have higher CPCs than Display campaigns but there are significant differences depending on which industry you operate in. While ecommerce CPCs often sit on the lower end around $1.16, a click on a legal service ad will cost you on average $6.75.
Knowing your industry’s average CPCs is important because it affects the number of clicks you can get for your budget which, in turn, affects your conversions. If you have a $15/day budget and your average CPC is $1, you can get 15 clicks per day but with a CPC of $5, you’ll get only 3 clicks.
This leads to another problem you run into when your budget is too low: a lack of valid data. Using the above example, a campaign with 3 clicks per day doesn’t provide you with many insights and makes it hard to understand which keywords and ads work or don’t work well. Such a small amount of website traffic also won’t result in many conversions like sales, sign-ups or bookings. We recommend planning with at least $1,500/month (which comes to approximately $48/day) which can cover 2-3 small campaigns in a low CPC industry.
Conclusion
However much you decide to spend, keep in mind that you are in full control of your budget and can make adjustments at any time. Our recommendation is to start with 2-3 small campaigns and increase your spending as soon as you see a positive return on investment. Get in touch if you need help to get started and plan your Google Ads strategy.
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