What is Google Ads? #

Google Ads, previously called Google AdWords, is Google’s PPC advertising platform.

You can use it to create advertisements, bid on specific keywords, and determine how much you’re willing to pay for every click on your advertisement because Google Ads operates on an auction system, which happens in real-time.

When users search for a keyword you’ve selected, if your bid is higher than what other advertisers bid on that keyword, your advertisement will appear at the top of the search results with a small tag next to it indicating that it’s a paid result.

The best part of Google PPC costs is that you only pay when a user actually clicks on your ad.

It doesn’t matter how many times it’s displayed or how many people see it — you only pay when someone clicks and visits your website.

You can also set daily and monthly budgets on a campaign-by-campaign basis. So, after you find a winning keyword to bid on and a winning ad to run, you can let your campaign run knowing that you won’t go over a specific budget.

How does Google Ads work? #

When researching how much Google Ads costs, it’s essential to understand how the platform works. That’s because the design of Google’s auction system plays a role in your Google Ads cost and understanding this system can help you build a realistic budget for your campaigns.

Google Ads utilizes an auction model to determine both ad placement and cost.

An ad auction begins when a user searches for something on Google. If the search query matches up with keywords that advertisers are actively bidding on, eligible ads go to auction.

Within the auction, ad placement and cost per click are determined by an advertisement’s Ad Rank. Your ad’s ad rank is based on two things – your maximum bid for that specific keyword, and your ad’s quality score.

We won’t get into Quality Score (QS) in-depth on this page, but check out our recommended reading below to learn more about this metric and how to improve it.

As a brief overview, though, your ad’s QS is determined by a combination of its relevance to the keyword that triggered it, its click-through rate (how many users click on it vs.

how many times it’s been shown), and the quality of whatever page users land on after clicking your ad. The Ad Rank formula, then, is a simple one:

(Your maximum CPC bid) x (Your ad’s QS)

So, if your maximum bid for a specific keyword is $4, and your ad has a QS of 8, your Ad Rank is 32. Within a single auction, whoever ends up with the highest Ad Rank wins the top advertising spot. Google also uses Ad Rank to calculate how much you end up paying per click. The formula they use to calculate your actual CPC is:

(Ad Rank of the ad below yours) / (Your QS) + $0.01

Here’s a quick example to illustrate:

The most important takeaway here is that you can end up spending less while maintaining a higher ad position if your ad has a stellar QS.

Why advertise on Google Ads? #

While Google Ads pricing varies and depends heavily on your business, industry, strategy, and competitors, the platform offers an immense amount of advantages.

If you’re thinking about getting started with Google Ads, but on are on the fence, this breakdown of Google Ads benefits can help. Three reasons companies invest in Google Ads include:

1. Budget control #

Google Ads blows most other advertising channels clear out of the water when it comes to budget control. There is absolutely no minimum investment required to create a Google Ads account or run a Google Ads campaign. You could launch a test campaign on a $5/day budget if you really wanted.

Your results will depend, again, on how competitive the niche and keywords you select are, but the point is that you can then increase your budget as necessary.

This leads right into the next advantage of Google Ads…

2. Scalability #

Everything you do with Google Ads happens in real-time. That means you can scale up as soon as you’ve identified a successful campaign, or you can scale down as soon as you see a campaign underperforming. You’re not locked into any contract, required monthly spend, or anything like that.

The potential to scale really is unlimited with Google Ads.

If you have a certain campaign that’s bringing you great results with a spend of $500/month, you can instantly increase that $500 to $5,000 or beyond!

3. Analytics #

You have access to every last bit of data related to your campaign performance with Google Ads.

You can see exactly how many times your ad got served, how many people clicked on it, how many people converted after clicking on it, what time of day the ad is most successful, information about what sorts of users click on your ad, and more.

The amount of data available through your Google Ads dashboard is truly staggering.

This stands in stark contrast to the ambiguity of other advertising channels. Most forms of traditional advertising — TV, radio, newspaper — come with extremely limited analytics. You don’t actually know how successful your campaigns are, because you don’t know how many people see your ads or take action because of them.

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