Although Google Ads have been around since 2000, many business owners may still be unaware of how pricing for Google Ads is structured, how much your company should spend on Google Ads, and how to budget your ad spend effectively.

As we enter 2024, business owners are looking for ways to reach new customers while reaching their business goals. Google Ads may be a tool that you have used in years past, or perhaps, it’s a new channel your business is exploring. At PHOS, we believe that Google Ads are one of the best ways to grow your business, and we are here to share what we have learned about the cost of Google Ads over the past 10 years.

How Much Does It Cost to Have an Ad on Google?

Google charges on a cost-per-click (CPC) basis. This means that for every click that your ad receives, you pay for that click based on a variety of factors. Clicks on your Google Ads can cost anywhere from $0.50 to $10.

How Is Cost-per-Click Determined?

The cost-per-click (CPC) of Google Ads varies significantly based on several key factors. This includes the competitiveness of your chosen keywords, the quality of your ad, and the relevance of your ad to the search query.

Highly competitive keywords, often in industries like insurance, legal services, and online education, can drive higher costs.

Additionally, Google’s Quality Score—a metric that assesses your ad’s relevance, landing page quality, and click-through rate—plays a crucial role. Better Quality Scores can lead to lower costs and higher ad placements, making it essential to optimize your ad content and landing pages for the best performance.

With so many different factors playing into your CPC, it can be hard to get an idea of what you may spend on Google Ads. Your team can lean on our experience—we can help you get a better understanding of how much running Google Ads may cost you.

Contact our experts today for more insight on Google Ad costs in your industry.

Is There a Monthly Charge to Google Ads?

Google does not charge on a monthly basis; instead, you can be charged for your Google Ads multiple times throughout the month. The time of your payment is determined primarily by thresholds—meaning the amount of ad spend that your account has reached.

If your account threshold is $500, you will be charged when your ad spend reaches $500. If you spend $1000 in the month, you will be charged twice.

What Determines Google Ad Spend?

As an advertiser, you can control your budget on Google. Your budget is determined by daily campaign budgets. For instance, if you have two campaigns running on Google Ads, you can set each campaign budget to $10 for a total of $20 per day.

These daily budgets can also fluctuate daily—Google documentation claims that your ads can spend up to 2 times their daily budget to take advantage of fluctuations in traffic.

We typically look at these daily budgets on a monthly scale. If your allocated budget for Google Ads in a month is $2,000, we will set your daily budget to $66, and although your daily spending might fluctuate, over the month, your spending will even out to around $2,000.

As an advertiser on Google, you also have the power to set a hard cap on your monthly spend. Because of the fluctuation of daily spending, this means that if your daily budget is $66 while your monthly spending limit is set to $2,000, your ads may stop running at the end of the month once your spending limit is reached.

Is $500 Enough for Google Ads?

In theory, there is no limit to how low you can set your Google Ads budget. That being said, in most industries, $500 is not going to go that far. If you are a home service company looking to generate leads, the average cost-per-lead in Google Ads can range from $50–$300 dollars, meaning that you may only get between 2–10 leads with only a few of those converting into actual business.

At PHOS, we like to evaluate your ad spend through the lens of ROI. Spending $5,000 a month on Google Ads may at first seem very expensive, but when you unpack that, your average lead value or purchase value is below your average cost-per-lead—meaning that your Google Ads are turning a profit.

How Do You Calculate Average Lead Value?

For some businesses, owners have their average lead value narrowed down to the cent. For others, it may be a guessing game. Determining your exact lead value requires data that some businesses do not have, but here are a few different ways to calculate your lead value.

Revenue / Leads = Total Lead Value

Average Sale x Lead Conversion Rate = Lead Value

(Lead conversion rate = Total Leads / Total Sales)

Average Lead Value = (Total Revenue / Number of Leads) x Percent Profit

Lead closing rate and lead value can vary depending on the channel these leads are coming from. When working with a partner like PHOS, our experts will help you narrow down what your cost-per-lead needs to be on Google Ads to make them worth it!

What Is a Realistic Budget for Google Ads?

When determining ad spend, you need to ask yourself a few questions.

What Is Your Industry and Competition Like?

Some industries have higher cost-per-click (CPC) rates due to competition. Researching average CPCs in your industry can help set a realistic budget.

What Is Your Conversion Rate?

Understanding your current conversion rate (how many clicks turn into customers) helps estimate how much traffic you need and, consequently, how much you should spend.

What Is Your Overall Marketing Budget?

Determining how much of your overall marketing budget can be allocated to Google Ads is crucial. It’s typically recommended to not put all your marketing eggs in one basket.

What Are Your Sales Goals?

Set specific, measurable sales targets to align your ad spend with expected revenue generation.

How to Determine the Answer

You may not know the answer to some of these questions, and you may not even know what some of these words mean. At PHOS, we have spent over $3 million Google Ads on behalf of our clients—our team of experts wants to help your business reach its goals through pay-per-click advertising. Get in contact with us today so that we can explore what your PPC strategy looks like together!

Are Google Ads Worth It in 2024?

Although the cost-per-lead from Google Ads has risen by 20% in 2023 (Wordstream by LocaliQ, 2023), Google Ads will continue to be one of the most effective platforms for online advertising in 2024. Despite the increase in cost-per-lead, the platform’s extensive reach and sophisticated targeting capabilities make it a valuable tool for businesses seeking to connect with their target audience.

Its ability to adapt and offer real-time performance insights means businesses can achieve a strong ROI with the right strategy. If you’re considering leveraging Google Ads but unsure about navigating the increased costs and complexities, our team of digital marketing and Google Ads experts is here to help. Get in touch with us to optimize your ad spend and maximize your results throughout all of your digital channels!

Conor Goller

With an unwavering passion for digital marketing, Conor aims to bring his expertise to clients in need. As an Inbound Marketing Executive, he is driven by his curiosity and creativity to utilize the newest and best practices to optimize clients’ ROI.

Aside from digital marketing, Conor enjoys playing board games and spending quality time with his friends and family. He also likes to stay active and spends time in the gym, and outdoors hiking and boating!