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Determining a Budget for Google Ad Campaigns

Cole Furrh

Founder of InterTeam
& PPC Expert
December 16, 2022
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Cover photo for How to Determine a Budget for Google Ad Campaigns

Maybe you've heard that small business is the backbone of the US economy.

According to a Forbes article published in December of 2022, 99.9% of US businesses are small businesses. Most of them have 0 employees.

Additionally, 65% of small to medium-sized businesses (SMBs) run some form of pay-per-click (PPC) campaign

So, if you want to know the total cost of Google ad campaign efforts required to succeed in today's market, read on.

Key Insights

  • What Google Ads is and how it works
  • How much Google Ads cost and the variables to consider
  • The Google Ads Auction, bidding, budgets, and spending
  • The Benefits of using Google Ads and if it's worth it

What Is Google Adwords?

Google Ads (formerly Google AdWords) is Google's search advertising platform.

Businesses can show potential consumers brief ads, product lists, videos, services, and other offerings.

Google Ads appear in a variety of formats, including search engine ads and display ads on non-search websites.

If you're entirely new to this topic, you can learn about the different kinds of Google Ads here.

What Are the Benefits of Using Google Ads?

Google Ads campaigns have no minimum expenditure. You could create a test campaign with a $5 per day budget.

Your results will vary depending on the niche and keywords you choose. However, you're free to adjust your budget as needed.

Additionally, everything you do with Google Ads happens in real-time.

You're not bound by contracts, minimum, or maximum monthly expenditures. If you have a campaign that's producing excellent results with a monthly budget of $500, you can expand your budget to $5,000 or more.

The amount of information available via your Google Ads dashboard is simply mind-boggling.

You can see how many times your ads were served, how many people clicked, and other information.

Compared to conventional advertising mediums such as TV or radio that have limited analytics, Google Ads offers you a clear advantage.

if you're interested in gaining qualified leads with Google Ads, go here to learn how to conduct effective lead-generation campaigns.

What Is the Google Ads Auction?

The Google Ads auction decides your Google ad placement and the price you pay for your chosen keywords.

Your ad's ad rank is determined by its ad quality and the maximum current bid for that keyword.

Achieving and maintaining a good ad Quality Score allows you to pay less on Google Ads while still achieving a higher ad position.

Daily Average Budgets, Spending, and Bidding Costs

When you begin advertising on Google, you may encounter various words relating to Google Ads prices.

One of which, the average daily budget, is the average daily amount you'll pay for each ad campaign over (about) 30 days.

The monthly spending limit is the maximum amount that Google will charge you for a campaign monthly. 

We go into more detail about these terms below.

Daily Average Budgets

When you create a Google Ads campaign, you will be prompted to enter a daily budget.

However, setting a daily budget does not guarantee that Google will spend that amount every day.

You're telling Google how much you'd like your daily spending to average out to at the end of the month.

Spending Limits

Your daily spending limit would be $100 if you chose a daily average budget of $50.

You will never pay more than your monthly spending limit in a single month.

You can establish a monthly expenditure restriction on your account if you don't pay for Google Ads through invoicing.


The amount you pay for Google Ads is also determined by your bid. This is the most you're willing to spend for a click on your advertisement.

You can establish maximum bid restrictions if you use automatic bidding.

However, Google may spend more than your maximum to improve Cost per click (CPC).

Google Ads Total Cost

Paid advertising can cost businesses anywhere from $9000 to over $30,000 per month.

However, Google Ads is a very customizable platform. You have complete control over how much you spend and when.

You can also adjust your ad expenditure in real time.

Google Ads Cost Based on Industry

Even though most businesses spend 10s of thousands of dollars a month, they employ their ad dollars in a variety of ways.

Their Google advertising expenditures are influenced by factors such as their industry, goods, services, and competition.

For example, the consumer services industry pays nearly $7 per click on average.

Google Ads Cost for SMBs

Google advertising costs for small-sized businesses averages over $9,800 each month.

Medium to large-sized businesses (including huge pay-per-click firms) ranges from $7,000 to $30,000 per month.

How To Determine the Cost of Google Ads

You can't change your industry costs, but you can affect other elements such as ad targeting and scheduling.

You could also update your landing page to increase your Quality Score or adjust the timing of your ad.

Specifically, we'll focus on 3 factors to help you determine your Google Ads campaign cost:

  1. Quality Score
  2. Ad Rank
  3. Cost per click

1. Get Your Quality Score

When someone searches on Google, an auction is started, and Google inserts all relevant advertising into it.

Its first step in selecting a winner is to award a Quality Score to each ad.

This is a value ranging from 1 to 10 based on the relevance of the ad and landing page to the keyword.

As we mentioned earlier, the better the quality score the better chance your ad has to increase its ad rank.

2. Determine Ad Rank

Google will use your Quality Score to assess whether or not an ad is worth more than the maximum bid.

The Ad Rank of each ad is determined by multiplying its Quality Score by its maximum bid.

Google will then use this information to decide where and when your ad will show in the paid results area.

3. Calculate the Cost per Click

The Google Ads cost per click calculation is based on the Ad Rank of the ad below yours divided by your Quality Score plus $0.01.

An advertisement in the SERP might pay less per click than another advertiser and still rank higher because of having a higher Quality Score.

This is how small-budget advertising can compete with big-budget ads on Google.

Additional Cost Variables

Several aspects influence your Ad Rank, but the most crucial ones to understand are your maximum bid and Quality Score.

These additional cost variables include: 

  • Auction-time quality
  • Landing page relevance and experience
  • Location
  • Device
  • Context of users' search queries
  • Alternative bidding techniques
  • Alternative ad formats

The Ideal Google Ads Budget

The success of Google Ads accounts for the vast bulk of Google's earnings.

The Google Ads Cost Calculator helps calculate your return on ad spend (ROAS).

This formula might help you assess if the cost of a certain Google ad is too pricey.

How To Set Realistic Budget and Bidding

The architecture of Google's auction mechanism influences the cost of your Google Ads.

Understanding this approach assists you in developing a reasonable marketing budget.

When you advertise on Google Ads, you have (nearly) complete control over your advertising budget.

There are certain aspects you can't control, such as your rivals' maximum CPC bids and ad quality. This is where to get inventive to reduce your Google PPC charges.

The amount you pay for Google Ads is also determined by your bid. Make sure to establish maximum bid restrictions if you use automatic bidding.

Remember, Google may spend more than your maximum to improve CPC.

How Google Ads Works

When a person searches for anything on Google, an ad auction occurs.

If the search query contains keywords for which advertisers are actively bidding, qualifying ads are auctioned off.

The Ad Rank algorithm is straightforward: click-through rate (how many people click on it vs. how many times it appears) and the quality of the website visitors that arrive after clicking your ad.

The relevancy of your ad is determined by your chosen keyword, as well as how it performs (Quality Score).

The person with the highest Ad Rank at the end of a single auction takes the top slot. The algorithm is also used by Google to determine how much you pay for each click.

If you're interested in B2B-targeting on Google Search Ads, go here.

Is Google Ads Worth It?

The value of Google Ads is determined by several aspects, including your industry, campaign optimization, and PPC strategy.

If your company's cost-per-click on Google Ads increases, take a step back and analyze your PPC campaigns.

You may do an in-house PPC audit or have an agency check over your account.

If you want to know how InterTeam determines ad budgets and conducts our campaigns, schedule a free strategy call with us here.

Want to see if paid ads would work for your business? Book a Free Marketing Strategy Call.

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