How Much Do Google Ads Cost?

Everyone always asks me the same thing whenever I recommend business owners invest in PPC advertising:

How much do Google Ads Cost?

My answer is always the same. It depends.

The truth is the cost of Google ads can vary massively depending on your industry and your strategy. Some businesses can be competitive with a budget as small as a couple of hundred bucks a month. Others need to spend several thousand dollars to see results.

My intention with this article isn’t to give you a definitive answer to how much Google ads will cost your business because there simply isn’t one answer. Instead, my goal is to explain:

how Google calculates the cost of ads
the factors affecting the cost of ads
how you can quickly find out how much keywords will cost
how to reduce your ad spend while remaining competitive

Ready to get clear on Google ads’ costs and learn how to make the most of your budget? Then let’s begin.

How Does Google Calculate Ad Costs?

Google doesn’t set a cost for each ad. Rather, it uses an auction model where companies bid on each keyword.

That means millions of auctions are happening on Google every minute.

It also means pricing is fluid based on how much competition you have and how much those competitors are willing to pay. Price swings aren’t uncommon as demand rises and falls.

You don’t need a big budget to compete, however. Google offers a reasonably level playing field that may allow the Davids of this world to compete with the Goliaths. The platform’s formula for showing ads (Ad Rank) depends on two factors: your ad’s quality score and your maximum bid.

What Are Your Ad Quality Score and Maximum Bid?

The maximum bid is the highest amount you will pay for each click of your ad. You set this when you create campaigns and can edit it at any time. The maximum amount you are willing to bid may favor big brands, but the quality score allows anyone to compete.

Google uses several factors to calculate an ad’s quality score, including its relevance to the keyword in question, the ad’s click-through-rate (CTR), and how good Google thinks the page is.

How Does Ad Rank Work?

Google uses the following formula to calculate ad ranks:

Ad rank = (Maximum bid) x (Ad QS)

If your maximum bid is $5 and you have a quality score of 6, your ad rank is 30 (5×6). The advertisement with the highest ad rank takes the first spot. The ad with the second-highest rank takes the second spot, and so on.

Google also uses ad rank to calculate how much you pay for each click: