One of the most frequently asked questions by businesses and marketers is, "How much should I spend on pay-per-click (PPC) advertising?" Google Ads has become a powerful tool for reaching a broad audience, prompting more specific inquiries such as, "How much should I spend on Google Ads?" and "What should my daily ad budget be?"

Establishing the right budget is essential for the success of any Google Ads or Bing Ads campaign, as it directly impacts the effectiveness, visibility, and reach of your advertisements.

This comprehensive guide is designed to help your business achieve its advertising objectives. It explains how to calculate a budget for Google Ads, covering all key aspects—from defining your campaign goals to analyzing data and refining your strategy—ensuring that your advertising investment delivers optimal results.

How does Google Ads work?

To set your Google Ads budgets effectively, it's essential to understand how the platform operates as a marketing tool.

Google Ads functions similarly to an auction. When a user conducts a search, an ad auction is triggered. Advertisers enter the auction based on the relevance of their keywords. Popular keywords attract more bids, which can drive up costs. The amount spent influences the ad's position in the search results, a factor known as Ad Rank.

Ad Rank plays a crucial role in determining both the cost-per-click (CPC) and ad placement. It is calculated using the quality score (QS) and the maximum bid for each keyword. The quality score is influenced by factors such as the keyword's relevance to the search query, the quality of the landing page, and the click-through rate (CTR).

Google Ads rank

Google Ads Rank determines the position of your ad on Google’s search results. It is calculated by multiplying your Maximum Cost Per Click (CPC) by your Ad Quality Score (QS). A high Quality Score can improve your ad's position while lowering overall campaign costs.

High-quality scores can effectively drive your ads higher whilst reducing the overall cost of running your ads.

Your Quality Score is influenced by several factors, including:

• Landing Page Experience
• Expected Click-Through Rate (CTR)
• Ad Relevance

Landing page experience

Landing page experience is a critical factor in Google Ads that measures the quality and relevance of the webpage users are directed to after clicking on your ad. It focuses on the user’s experience and how well the landing page content meets their needs and expectations.

A positive landing page experience is essential because it enhances user satisfaction and encourages them to take the desired action, such as purchasing, filling out a form or engaging with your website. Google evaluates the landing page experience to ensure users have a positive and relevant experience after clicking on an ad.

Several factors contribute to the landing page experience, including:

Relevance

The landing page content should closely match the content and intent of your ad. If the ad promises certain products, services, or information, the landing page must deliver on those promises. Additionally, the content should align with the targeted keywords and ad copy, provide valuable information, and include a clear call to action (CTA).

Originality

The content on the landing page should be original, unique and valuable to users. Avoid duplicating content from other sources, including content on your website. To avoid issues of originality, your website content should have effective copywriting, which will also directly influence your search engine optimisation (SEO).

Transparency

Communicate your business offerings and avoid misleading or deceptive practices that might confuse users. The website and landing page should be carefully considered for UX/UI, and a minimalistic approach to web design should also be considered.

Navigation

Ensure that users can easily navigate the landing page and find what they want without encountering obstacles or irrelevant distractions.

Mobile-friendliness

With the increasing number of users accessing the internet on mobile devices, it’s essential to have a mobile-friendly landing page (landing page design) that provides a seamless experience on smartphones and tablets.

Page load speed

A fast-loading landing page (website optimisation) is crucial to prevent users from getting frustrated and abandoning the page.

Improving your landing page experience can optimize your Google Ads performance by raising your Quality Score (QS) and potentially reducing your cost-per-click (CPC). A favorable landing page experience leads to increased user satisfaction and improved campaign outcomes, benefiting both advertisers and Google’s users.

Your ads and ad budget are directly linked to your website’s design, content, and underlying code.

Objectives

Your marketing campaign and settings are based on your organisational goals. To help you achieve these goals, here are some common approaches that most companies use:

Generate sales

The primary goal of any company is to generate revenue, and Pay-Per-Click (PPC) ads offer a lucrative opportunity to reach high-intent audiences. To boost sales, bidding on relevant keywords is crucial, even if they come at a higher price. View it as a valuable investment that can yield long-term profits.

If your objective is to generate sales, your advertising campaign budget is expected to be much higher as your target keywords are more focused. These keywords typically secure a higher position in the auction because they attract significant attention from marketers and competitors. They are seen as words that have a high opportunity for conversions.

Increase traffic

Small businesses often strive to increase their website traffic to raise brand awareness among potential customers, making it a great way to kickstart their business.

If your focus is on generating traffic rather than sales, it’s best to keep your budget for PPC campaigns low. You can also take a cautious approach by bidding on generic keywords and ad extensions. While this may not result in immediate revenue, it can generate high levels of traffic, which could lead to future sales.

You can effectively distribute your Google Ads campaign budget by implementing traffic-focused campaigns, reaching a larger audience at a lower cost-per-click. This can ultimately lead to a reduction in budget while still increasing your visibility.

Brand awareness

It is a known fact that about 65% of individuals are visual learners. Hence, advertisements serve as a valuable marketing tool that leaves a lasting impression. By promoting your brand name, ads encourage visitors to watch and remember your offerings.

Increasing brand awareness can significantly impact a company’s website performance, improving associations, trust and engagement with the brand.

Brand awareness ads aim to increase a brand's visibility by using a high volume of repeated visuals. They are not specifically targeted to a particular audience and are shown to a broader viewership. The cost of these campaigns is significantly lower than both traffic and sales conversion campaigns.

These campaigns aim to expand your brand’s reach and increase visibility, targeting potential and future customers.

Lead generation

Lead Generation Google Ads campaigns are advertising campaigns specifically designed to capture potential customers’ information and generate leads for a business. Unlike traditional Google Ads campaigns that focus on driving website traffic or sales, lead generation campaigns prioritise obtaining contact details from interested individuals, such as names, email addresses, phone numbers or other relevant information.

It is crucial to align your landing page with your targeted keyword and ensure that the call-to-action (CTA) captures the attention of your visitors and encourages them to enter the sales funnel. A well-thought-out sales strategy is essential in retaining potential customers and boosting sales.

Maintaining your quality score is crucial if you want Google to reward your brand with a discounted average cost per click and higher rankings in Google Search results. You must ensure that your target keywords, Google Ads campaign and landing page align perfectly.

Budget

Effective budgeting is essential for the smooth running of any organisation. This involves creating a comprehensive plan to manage expenses and make strategic investments that yield high returns. Maintaining control over costs and maximising profitability through well-informed financial decisions is imperative.

Initial budget

Figuring out your budget for Google Ads requires extensive keyword research and a clear understanding of your company’s goals. It involves developing a marketing strategy and selecting appropriate KPIs (key performance indicators). 

These factors must be carefully considered to establish a starting budget.

Marketing strategy

If your business already has a robust online presence and established lead generation methods, you may not have to worry about acquiring new leads. However, if you're starting with online marketing, it might be beneficial to experiment with various channels such as Facebook Ads, SEO optimization, public relations, and referrals to attract potential customers.

Before adding Google Ads to your marketing plan, conducting a thorough analysis of your current marketing channels is essential. Ask yourself the following questions:

• Are your current marketing efforts generating the desired results and attracting the right audience?
• Do you clearly understand your target market and how effectively are you reaching them through your current channels?
• Are your existing marketing channels sustainable and scalable for long-term growth?
• How does acquiring leads through your current channels compare to the potential costs of using Google Ads?
• Will Google Ads complement your efforts or potentially cannibalise your other marketing channels?
• Can Google Ads offer unique advantages, such as targeting a specific audience segment or boosting your brand's visibility?

Competitors

Monitoring your competitors is crucial to digital marketing, especially in a highly competitive and rapidly evolving market. While focusing on your business is important, keeping a close eye on your rivals allows you to gain valuable insights and stay ahead of the competition.

Tools like SEMrush and Google Keyword Planner provide valuable data on your competitors’ Google Ads budgets and the keywords they are bidding on. By analysing this information, you can identify areas where you can improve your marketing strategies and discover potentially cheaper yet effective keywords to bid on.

Observing your competitors’ actions helps you understand their strengths and weaknesses, allowing you to adapt your marketing efforts for better results. You can learn from their successes and mistakes, fine-tune your ad copy, and target and identify untapped opportunities in the market.

Keyword analysis

Formulating your initial budget involves a straightforward approach: assess the expenses tied to the keywords you intend to bid on, thereby charting a course for your company’s financial strategy. This preliminary stage entails incorporating your landing pages into the Google Ads Planner. Doing so will yield a compilation of pertinent keywords, complete with their popularity and levels of competition.

Consider including web pages linked to your business’s products and services. This practice can unearth underappreciated keywords that present bidding opportunities. Due to their lower competition, these search terms come with a more economical price tag while still possessing the potential to draw substantial traffic.

Keywords branded with commercial intent generally yield higher click-through rates than their non-branded counterparts. For instance, while the term “white dress” is rather generic and appeals to a broad audience, the phrase “H&M white sundress” directs attention towards the distinct offering of the brand. Additionally, long-tail keywords extend your reach and correlate with a heightened conversion rate, which sees an increase of 36%.

Key performance indicators

The final process of estimating your advertising expenses involves a thorough examination of the key performance indicators (KPIs) that hold significance for your business. Presented below is a set of standard KPI metrics:

• Quality score
• Average position
• Click-through rates (CTR)
• Conversion rate
• Impressions
• Cost per conversion

You can harness the power of cost per acquisition (CPA), determine conversion rates and strategically utilise existing CPA across different channels. Selecting and prioritising approaches that align with your company’s goals and objectives is essential.

If altering the target location does not yield discernible improvements in return on investment (ROI), it may be advisable to allocate less investment towards achieving a higher average position.

Likewise, if your company’s primary objective revolves around boosting sales, it’s prudent to focus on optimising the cost per conversion. As you accumulate sufficient data for more precise budget planning, you retain the flexibility to adjust the settings within your Google AdWords account as needed.

Budget distribution

Your search campaigns will be categorised into research, competitor, branded, high intent and top performers, each with a dynamic nature.

On a technical level, allocating a significant portion of your budget to branded keywords might seem optimal, given your desire to establish a dominant brand presence in the market. However, Google indicates that acquiring these keywords could demand a hefty price of at least $97 per click.

Unless you’re willing to make an extravagant investment for advertising, it’s wiser to channel your focus towards high-intent, research-oriented and top-performing keywords. These keywords are known to yield a substantial conversion rate. Recognising that these dynamics fluctuate based on varying companies and niches is important. Regular research and budget adjustments are advisable, preferably every week, to ensure optimal Return on Investment (ROI).

Display advertising

The Google Display Network (GDN) is a powerful tool for increasing brand visibility. While not primarily intent-driven, it helps businesses showcase products and services through engaging visuals like banners and logos. Small businesses can leverage display ads as a cost-effective way to build awareness and reach a broader audience.

Remarketing

Remarketing campaigns help re-engage previous visitors, increasing the chances of conversion. While some may argue that remarketing targets the same users, it remains a highly effective strategy for driving sales. Budget allocation for remarketing should be based on conversion rates from returning visitors, ensuring efficient spending on potential leads.

Budget calculator

The Google Ads Budget Calculator provides an intuitive interface for adjusting ad spend and assessing its impact on Return on Investment (ROI). Businesses without dedicated financial oversight can leverage this tool to make data-driven budgeting decisions efficiently.

Keywords

The choice of keywords can shape the outcome of your Google Ads campaign. It stands as a pivotal element in influencing your budget. Although opting for a commonly searched generic keyword might seem viable, it requires substantial budget allocation to secure a top-ranking position in the Search Engine Results Pages (SERPs).

The concept of ad quality score introduces the notion of ad relevance. Utilising pertinent keywords elevates your brand’s standing and amplifies your presence among interested clientele, thereby augmenting Return on Investment (ROI).

Keyword relevance

Businesses can acquire insights into search volume patterns using tools such as Google Keyword Planner and Google Search Console. Employing broader keywords yields a higher click-through rate, encompassing potentially overlooked targeted traffic. Conversely, employing precise keywords generates fewer clicks and searches, yet the audience is more predisposed to purchasing your brand.

Hence, finding an equilibrium between high-search keywords and specific terms aligning with the preferences of your target audience is essential.

High cost

Industry average

Targeting

Your choice of target options directly influences your brand’s Google Ads spending. Review the available strategies and their corresponding budgets to determine the best approach for maximizing your campaign's performance.

Location

Incorporating location-based terms and keywords can attract a broader audience while maintaining a lower average cost per click. You have the flexibility to select a broad or precise location, ranging from the target country to location groups such as business addresses or places of interest, for your Google Ads campaign.

This approach ensures that you effectively reach the appropriate customers. Even if the target audience is relatively small, they are more likely to contribute to an enhanced conversion rate compared to a larger but less targeted audience. We recommend examining the trends within the specific country or region you intend to target.

Time of day

Selecting a precise timing for increased investment in Google Ads holds the potential for greater profitability. Observe how Instagram influencers often inquire about the optimal time to post pictures to maximise their audience and engagement. This practice highlights their aim to identify the most opportune moment for reaching a larger audience.

Google Ads operates in a similar fashion, albeit for specific types of businesses. Therefore, we recommend conducting experiments with various time frames. This is especially pertinent for local businesses with brick-and-mortar stores, as they can allocate a higher advertising budget during operational hours. This strategic approach enhances in-store foot traffic and, with effective monitoring, can yield potential customer acquisitions.

Device

Optimizing your ad placements based on device usage can drive conversions and improve cost efficiency. If your website is optimized for mobile, spending on desktop, tablet, or TV campaigns might not deliver the best returns. However, analysing your current and prospective customers' device preferences is essential to ensure your advertising strategy effectively reaches your target audience.

Planning tools

Explore essential tools that streamline your Google Ads budgeting process by offering valuable keyword insights and competitor analysis to optimize your ad spend.

Keyword planner

With a user-friendly and intuitive interface, the Google Keyword Planner aids in estimating advertising costs by generating relevant keywords. Furthermore, in alignment with your marketing campaign, Google recommends the most optimal keywords from the list.

Each keyword comes with accompanying information such as average monthly searches, competition level and bidding range.

Wordtracker scout

This is a free extension available on Google Chrome that identifies your competitors’ keywords. It helps remove the guesswork from keyword planning to efficiently select one that works for your Google Ads campaign budgets.

Benefits

By this point, you likely have a reasonable understanding of how Google Ads functions and how to initiate the budgeting process. However, if you still find yourself unconvinced or facing budget constraints, it’s worth considering the compelling rationale behind why 96% of brands trust Google Ads.

Customised

The primary and most compelling aspect that renders Google Ads suitable for businesses of all scales is its adaptable budget and bidding approach. Google has refrained from imposing any mandatory minimum threshold for its advertising services. This means that you can establish a Google Ads account and launch a marketing campaign with a starting budget as modest as $5 per day.

Other considerations, such as the prevailing competition level, will dictate whether you should allocate more or less funds to your ads. Moreover, the flexibility to adjust your ad budget up or down as needed adds an extra layer of control.

Real-time analytics

In addition to promoting your brand, the Google Ads dashboard furnishes essential insights pertaining to your advertising campaign. It supplies information on metrics like views, clicks, conversions and a host of other data, all of which enhance your brand’s effectiveness.

This is where Google Ads gains a competitive advantage over alternative advertising tools. Even when juxtaposed with other media channels such as television, newspapers and more, Google’s digital advertising takes the lead regarding functionality and return on investment.

Scalability

With access to real-time campaign updates, adjusting the scale of your campaign becomes straightforward. There are no binding contracts or monthly obligations, enabling you to swiftly scale down if a campaign underperforms or scale up when the situation demands.

Costs

Below is a brief overview of Google Ads expenses segmented by different pricing considerations. Please note that these are approximate monthly expenditures, and actual costs can differ for various businesses.

• Average Ad Spend: $1,000 — $10,000
• CPC (Google Display Network): Less than $1 per click
• CPC (Google Search Network): $1 — $2 per click
• PPC Management Tools: $15 — $1500
• Expert Google Ads Management: $350 — $10,000 or 15 - 30% of ad spend.

Calculating your budget

While there is no definitive method for determining a monthly advertising budget, rigorous planning and strategic analysis can significantly contribute to business success.

A standardised approach is seldom adequate because online success is contingent upon multiple variables. It may be necessary to conduct comprehensive audits, evaluate various keyword strategies, adjust budget allocations, and modify key performance indicators (KPIs) accordingly. Over time, empirical experience will help determine the most suitable strategy to meet your business objectives.

Continuous competitor monitoring and stringent campaign management are imperative. Engaging a reputable advertising agency can streamline the campaign development, implementation, and management process, ensuring that your advertising budget is utilized with optimal efficiency and effectiveness.