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Compared to traditional advertising, Google Ads offers a much higher return on investment (ROI), as it has a low entry-level cost and a much more targeted approach. At the heart of pay-per-click (PPC) campaigns are keywords. These building blocks are instrumental in your ad copy and landing page content, and ultimately, they have a significant influence on whether or not your campaign is profitable.
You may wonder, how do I find out how much a keyword costs?
As with many important metrics in Google Ads, keyword costs can rise and fall, and it’s essential to keep a close eye on your expenses if you want to generate a positive ROI.
In this article, we’ll delve into the cost of keywords for PPC advertising campaigns, and help you develop your knowledge so you can make more with your budget.
In Google Ads, the keyword cost is the amount of money an advertiser pays the search engine every time someone clicks on their paid ad. This value is known as the cost-per-click (CPC). It varies depending on the competition level and the industry.
Industries with a high customer lifetime value (CLTV) and high profits tend to pay more for expensive keywords. These soaring costs happen when a lot of bidders compete for the same keywords.
For example, if you sell jeans, you may run campaigns based on two focused keywords:
So, you will start by asking yourself:
How do I find out how much a keyword costs?
First, determine the popularity and competition score of each keyword. You can do this initial research within the Google Ads interface with the Keyword Planner tool. You can also do it in Google Chrome extension given below.
When you search the keyword, “Blue jeans for men” and “Blue jeans for women,” you will see the following results:
This example is a high volume, high competition keyword. While high volume is a good indication that it will bring traffic, it’s better to choose keywords with low competition. Also, consider the CPC because a low CPC with high competition is not worthwhile. It’s smarter to search for related keywords that are less competitive.
Keyword Planner makes suggestions of close variant keywords you may wish to use. Let’s say you discover some new keywords that have high volume, low competition, and a low bidding price:
You decide to select these keywords:
Assuming the average CTR (clickthrough rate) in your industry is 5%, you calculate the estimated number of clicks you’ll receive in a month based on your keywords:
Keyword Volume * Average CTR for your industry = Clicks per month
As with assumptions:
Expected CTR = 5%
Keyword Search Volume = 30,000 per month
Expected Impression Share = 50%
Impressions Received = 15,000
Clicks = 750
Next, how do I find out how much a keyword costs?
Use the formula below to calculate the monthly cost:
Clicks per month * cost per click = monthly cost for the keyword
For example, if your keyword CPC is $1.12, you can expect to pay $850 per month for that keyword.
You can repeat this process with these two formulae for every keyword in your campaign. After you’re done, add all the monthly costs of your keywords together to get a sense of your monthly budget.
Imagine you have a monthly budget of $1000. You can calculate your average daily budget as follows:
1000/30.4 = $32.89
Whereas 30.4 is the average number of days in a month taken by Google Ads.
So, day-to-day, you can keep monitoring your costs to see that you are staying close to this value.
In PPC advertising, it’s good to know how much a keyword costs, as it can guide your decision-making in regards to your budget and bidding. It’s also crucial to remember that keyword costs fluctuate depending on several factors.
Here are some variables that Google will take into account when calculating keyword costs:
The most important factor remains the number of clicks a keyword has been receiving. This is why the most popular keywords are often the most expensive keywords as well. Because of their high demand, the keyword prices increase and you have to spend more money on them than you have to do for the other keywords on your list. You have to check the keyword cost for each and every keyword you intend to use in your campaign. Otherwise, you wouldn’t be able to set a reliable budget.
Keyword search volume tells you how many people use that term to search each month. So, higher search volumes bring great opportunities for brand awareness, exposure, and traffic. However, it’s more likely these terms have high cost per click (CPC) as a lot of businesses want to target them.
The competition value is an indicator of how many advertisers are bidding on a keyword on the Google network. As the competition level increases from low to high, so too does its bidding price, which invariably leads to high CPC and CPA.
For example, in our previous examples — Blue jeans for women and Blue jeans for men — have high competition, which means we’ll pay more, and find it harder to rank with these terms.
Google Network comprises two platforms — the Search Network and Display Network. This format gives you greater flexibility and control on how and where you want your pay-per-click ads to appear.
Search Network includes search engine result pages (SERPs), search sites that partner with Google, and Google partner’s websites. The Display network includes Gmail, Blogger, YouTube, and many other partnering sites.
In other words, the Search Network targets users with high buying intent, whereas the Display Network targets users with shared interests. If you want to focus on those with high intent, you can expect to pay higher costs. Therefore, it is relatively more expensive to advertise on the Search Network compared to the Display Network.
You can refine your target audience by adjusting your demographics, location, and device targeting. For example, you may have a keyword that has a monthly search volume of 10,000 per month. You can avoid irrelevant clicks and reduce the costs by narrowing your targeting to focus only on mobile users, aged 18-34, within specific cities within the United States.
Quality Score is an influential metric that impacts keyword costs. Google Ads gives preference to ads with higher Quality Score, so they will rank higher, and often cost less. With a focus on improving Quality Score, you can reduce your wasted spend and pay less for keywords.
Markets change dramatically around holiday periods and seasonal shopping times, with new competitors and products arriving, and consumer purchasing habits changing all the time. Getting the right keywords can help you stand out in a busy period, but you need to act fast and be smart about your bids to make sure you make a good return.
Whenever you select keywords in Google Ads, you can set the amount you are willing to pay for a click on your ad. This value is known as the maximum cost-per-click or Max CPC bid.
You have the option of setting your Max CPC manually, or if you prefer, you can use smart bidding to let Google Ads make automated bids for you.
With manual bidding, it’s easy to set keyword bids at the Ad Group level or the keyword level. Doing the latter allows for a high level of customization and control, and you can change your bids at any time for any specific keyword.
Imagine the ads based on your keyword, “best blue jeans for women” are performing well at the current costs of $0.80. You may decide to raise your bid to $1, as this can increase the number of conversions your ads get for this keyword.
With the help of the Best strategy, you can easily reduce the cost of ads on Google.
Maximize Clicks is a feature in Google Ads that allows you to set your Max CPC bids, and then hand control to the platform to automatically generate you as many clicks as possible within your bid limit.
If the ads based on your keyword, “best men’s blue jeans,” are not getting enough clicks at the current bid of $0.20, Google will automatically increase the bid to your set bid limits to increase your clicks.
Google Ads has a range of practical tools that help advertisers with their PPC keyword research and bidding strategies. Consider using these to make more bang for your buck:
Follow the automated recommendations for bid changes to exercise better budget management. A suggested bid increase or reduction can help you generate more ad clicks or save on costs.
You may wonder how many more impressions you would get if you raise your bids by $0.10. With the bid simulator, you don’t need to wonder anymore. This tool makes projections on proposed bids, showing you estimates for the click, cost, and impression data that your ads would receive if you adjust keyword bids.
The enhanced cost-per-click strategy will maximize your conversions for manual bidding while maintaining the current cost-per-conversion. Google accomplishes this by targeting ad auctions where you are more likely to win, and then it raises your Max CPC bid to bid aggressively for specific keywords. Furthermore, this automated strategy also reduces keyword bids in auctions that are less likely to lead to sales or conversions. As a result, it is an excellent tool for improving your return on advertising spend (ROAS).
Conversion tracking is an advanced feature that helps you identify the keywords that influence prospects and lead to conversions. Whether it’s a purchase or newsletter signup, you must track your conversions. as you can learn more about the customer journey and the behavior of your prospects. This information guides your decisions, so you’ll know when to increase your Max CPC for top-performing keywords, and when to reduce your bids for underperforming keywords.
For many advertisers, reaching the first page of Google SERPs is a top priority. Paying a lot of money to advertise your business, products, and services seem worthwhile when you get brand visibility and exposure you need to drive traffic and increase sales.
With page one in your sights, keep these three keyword bid estimates in mind to improve your chances of climbing to the top:
Note that these estimates are based on an exact match for your keyword. Also, your ad position depends on the Quality Score and competition for that specific keyword.
In PPC advertising, you must be mindful of your budget. Unless you have unlimited funds to spend, a few poor decisions can quickly drain your resources, and end your hopes. Even with deep pockets, you’ll struggle to get far in Google Ads without an effective keyword bidding strategy.
Think carefully about how best to reach your audience, and consider the competition level for each keyword. With time and a little experimentation, you can discover valuable keywords that are easier to rank for in SERPs. Stay proactive to manage your budget and keyword bids effectively, and you’ll soon get the results you want.
Your business can take this approach up a notch by learning How to Find Profitable Keywords.
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