How Much Should You Spend On AdWords

How much should you spend on Google AdWords? In this article, we will show you strategic planning on how to control your Google AdWords budget

By Claudio Pires
Updated on March 8, 2023
How Much Should You Spend On AdWords

Google Ads is a powerful advertising tool for small businesses. We work with clients who have had great success generating leads and seeing a great ROI by using Google Ads. However, one of the most common questions is: How much should you spend on a Google AdWords campaign? In this article, we will show you strategic planning to control your Google AdWords budget.

How Much Google AdWords

Regarding AdWords – and most other online marketing platforms – the rates aren’t set in stone. A click on one of your ads may cost you anything from a few cents to several dollars, depending on many factors. One of the main factors is Competitiveness.

The more people that want to display their ads against specific search terms, the more expensive they will become. Where you want to display your ads. For example, showing your ads in Google search results tends to be more expensive than through their Display Network.

How to Calculate a Google AdWords Budget

The average Cost-Per-Click (CPC) on AdWords is between $1-2 for Google search pages. However, AdWords doesn’t outright enable you to purchase and display. Instead, it allows you to bid on keywords continuously. You need to set a bid for your ads, and if your bid ‘wins,’ your ad goes live. 

Therefore, you need to ensure your bid is competitive enough to start getting clicks and impressions. The more competitive a keyword is, the higher your bid will need to be if you want your ad to get screentime. Sometimes, people pay over $50 per click for niches that promise a high Return on Investment (ROI).

However, money is not the only factor that comes into play with AdWords. When you launch a campaign, Google assigns your ads a quality score. In some cases, ads Google deems high quality can ‘win’ auctions even with lower bids and get higher ‘ad ranks.’ That means other ads will be lower on the totem pole, but they can still get published.

This way, Google AdWords ensures that every business can only monopolize search results, even though they may have much larger budget.

A lot goes into calculating your ads’ quality scores, so we won’t get into that today. However, ads with lower quality pay more in the long run. Therefore, to get the best return on your investment, you must look for competitive keywords, create high-quality ads, and set aside a decent budget.

Spend On AdWords Marketing Campaign

When it comes to online ads, there are several types of campaigns you can run. The two most common are: Cost-Per-Click (CPC): With this type of campaign, you pay each time someone clicks on your ads. Cost-Per-Mille (CPM): In this case, you pay ad networks each time they display your ads a thousand times.

From a cost perspective, CPM ads tend to be cheaper. This may sound more cost-effective since you’re paying less for a thousand views. However, CPC ads have much higher rates of conversions, so in most cases, you end up paying less for clicks than for views when you compare ROIs.

Since CPC ads are so prevalent in the industry, there is limited information on CPM averages. As such, we will focus primarily on CPC while also discussing Cost-Per-Action (CPA). The latter is how much you should expect to spend on ads each time you get a conversion; averages vary greatly depending on your industry.

Let’s start with some of the most expensive fields, according to their CPC price:

  • Insurance: $54.91
  •  Loans: $44.28
  •  Attorney: $47.07
  •  Credit: $36.06
  •  Hosting: $31.91

These fields are expensive because they all have the potential for amazing ROI, such as landing clients with recurring payments. As such, one conversion can lead to multiple paydays. Earlier, we mentioned how the average CPC price stands at about $1-2, which means these premium fields are outliers.

The Costs AdWords Strategic Planning

If you want to know how much you should expect to spend on CPC ads for any keyword, you can use a tool such as SEMRush to help you find out. Its premium service enables you to do up to ten free searches with a free account.

For each keyword analyzed, SEMRush will give you an estimate of how much you can expect to spend on CPC ads. With this tool, you can access related keywords and their estimated CPCs with your original report.

However, CPC data is not enough to tell you how much you should expect to spend in your AdWords budget. What matters is your CPA, where the ‘A’ stands for both action and acquisition. This metric tells you how much you should expect to spend on each conversion.

The average CPA across all industries is around $60. So, for example, if you budget $20 per day, you could average one conversion every three days. However, this also depends on your CPC, target industry, and more.

From our experience, you want to budget for at least 100 clicks for each keyword you’re targeting. This way, you’ll have enough data to determine if the keyword is worth your effort and which of your ads is doing better. It can be expensive, but you must get enough data for a statistically significant experiment. Without it, you’re publishing ads blindly and just hoping one of them will strike gold.

AdWords Control

You need to pay to test ads for each keyword you want to target if you want to get enough data for significant results. That’s a lot of money, so you must be careful about how you spend it.

You shouldn’t blow your entire budget in a single day. It can be tempting to do so if you want to get quick results, but many factors can impact conversions. For example, people may be more willing to purchase at specific times or dates. In other cases, your ads will do better with people from particular locations.

Your goal should be to spread your budget for at least a week or two. Think of it as a test phase., which helps you generate enough data to grow your campaign. Once you know which ads do better with which audiences, you can target those users. This should net you more conversions and a more significant ROI.

Fortunately, AdWords provides advanced targeting and daily budgets, so you can configure your campaigns to run independently. Then it’s just a matter of checking your reports frequently. Then, if you see a campaign is going too long without getting your results, you can nix it and return to the drawing board.

Concluding How Much Spend AdWords

Running ads online can get expensive; some spend hundreds or thousands of dollars on their strategic planning daily on AdWords. However, you can also get good results with more modest budgets. Before you start, it’s smart to budget how much you can spend on Ads and stick to that number initially.

We hope that this article, with strategic planning on how to make a Google AdWords budget, has been of help to you. In most cases, you’ll need to spend at least $100-200 on AdWords for a keyword with an average CPC to determine if your ads are getting the job done. If you aren’t making a return on your investment at that point, you may need to return to the drawing board to rethink your strategy.

Claudio Pires

Claudio Pires is the co-founder of Visualmodo, a renowned company in web development and design. With over 15 years of experience, Claudio has honed his skills in content creation, web development support, and senior web designer. A trilingual expert fluent in English, Portuguese, and Spanish, he brings a global perspective to his work. Beyond his professional endeavors, Claudio is an active YouTuber, sharing his insights and expertise with a broader audience. Based in Brazil, Claudio continues to push the boundaries of web design and digital content, making him a pivotal figure in the industry.