If you have run Google Ads before, you may have asked yourself the same question every other business owner does… “How much should I spend?”
Some say a few hundred dollars a month is enough, while others insist that you need thousands. In reality, a “good” budget depends on a few factors, including your goals and how well your campaign is managed.
Below, this SEM agency in Chicago, Illinois is going to explain how Google Ads budgets actually work. When you understand this, you can set a budget that delivers real results.
How does Google decide what you pay for ads?
Every time someone searches on Google, an instant auction decides which ads appear and in what order. Each eligible ad competes in that auction, and Google considers more than just who bids the most. It also evaluates ad quality and relevance to decide which ads provide the best user experience.
When you create a campaign, you set an average daily budget. This is the amount you’re comfortable spending each day. You also set a maximum cost-per-click (CPC) bid, which is the highest amount you’ll pay for one click.
Why do some clicks cost more than others?
There are many factors that influence how much you’ll pay for traffic and leads.
The most important one is your industry. Some industries, like law or home services, are far more competitive. Because a single new client can be worth a lot, advertisers in these fields usually bid higher, which increases the cost per click.
Keyword competition also plays a major role. When many advertisers target the same searches, the auction price naturally increases.
Then there’s the location. Ads in busy metro areas usually cost more than those in smaller markets because competition for attention is higher.
Finally, your ad quality impacts what you pay. Google looks at how relevant and useful your ad and landing page are. Strong ads with good click-through rates and clear landing pages can earn better positions for less money.
An experienced SEM agency in Chicago, Illinois knows how to balance bids and quality. They can help you get more from every advertising dollar without overspending.
How do you estimate the right Google Ads budget for you?
Start by defining what you want your ads to achieve. For example, do you want more website visits or online sales? Each goal will have its own cost expectations.
Let’s say one new customer is worth $200 to your business, and your average cost per click is $4. If about 2% of those clicks turn into customers, you’d need roughly 50 clicks to make one sale. That’s $200 in ad spend to earn $200 in revenue or your break-even point. From there, any improvement in your cost per click or conversion rate moves you into profit.
You don’t always pay your full bid amount either. Google charges what’s called your actual cost per click, which is usually lower than your maximum bid. Because of that, you might get more clicks for your budget than you expect.
To find your baseline budget, combine three numbers:
- How much a customer is worth to you.
- Your expected cost per click.
- Your expected conversion rate.
This gives you a simple way to estimate what you’ll need to spend to break even or turn a profit.
Why do some advertisers lose money on Google Ads?
Many advertisers lose money not because they spend too little but because they spend it the wrong way. Here are the biggest mistakes you should avoid.
Bidding too broadly: If you’re a roofing company bidding on the word “roof,” your ad could show up for searches like “roof design ideas” or “DIY roof projects.” Those clicks rarely turn into customers. Broad keywords usually waste money on traffic that doesn’t convert.
Ignoring negative keywords: Negative keywords block your ads from showing on irrelevant searches. For example, if you don’t offer free quotes, add “free” as a negative keyword. That way, you won’t pay for clicks from people looking for something you don’t provide.
Sending traffic to weak landing pages: If your landing page loads slowly or doesn’t match what your ad promises, people will leave. Google also factors landing page experience into your ad’s performance, so a poor page can increase your costs and lower your results.
Setting and forgetting your campaign: Bidding trends and search behavior change constantly. If you don’t monitor and adjust, your results will slip, and your budget will burn fast.
Working with an experienced SEM agency in Chicago, Illinois is the best way to make sure you avoid these mistakes. A good team watches your campaigns daily, refines keywords, tests new ideas, and makes sure every dollar you spend goes further.
Looking for an SEM agency in Chicago, Illinois?
Are you looking for a professional SEM agency in Chicago, Illinois that can help you launch high-performing Google Ads campaigns? If so, look no further than Digital Destination LLC. Our team of SEM experts will help you generate more qualified leads and maximize your ad return. Contact us at (312) 933-6806 to schedule a free consultation.