We explain how Google Ads works, discuss potential costs, and demonstrate how to evaluate its profitability through Return on Investment (ROI) calculations.
If you’re running a business and considering diving into the online advertising world, Google Ads is likely on your radar. It’s powerful, versatile, and with over 3.5 billion searches daily on Google, it’s a way to ensure your product or service doesn’t go unnoticed.
But you might be asking, “How does Google Ads work?”, “What should I expect to pay?” or “How do I know if it’s worth it?” Let’s break it down for you.
The Mechanism Behind Google Ads
Google Ads is a pay-per-click (PPC) advertising platform, which means you only pay when someone clicks on your ad. Sounds neat, huh? It’s designed around keywords – words or phrases that users type into Google when looking for something. As an advertiser, you bid on these keywords relevant to your business.
When a user types a search query, Google performs an auction behind the scenes. The advertisers who bid the highest for that keyword and have a high-quality score (a metric Google uses to measure the quality of your ads) are placed in the coveted top spots of the search results.
What’s The Price Tag?
Now, onto the million-dollar question – what does all this cost?
The answer isn’t so straightforward, unfortunately. The cost of Google Ads varies widely depending on your industry, location, and the competitiveness of your chosen keywords. For instance, highly competitive keywords in industries such as insurance, finance, or legal services can cost £50 per click or more! But for most businesses, the cost per click (CPC) typically ranges from £1 to £2 on the Search Network.
On the other hand, there’s the Display Network (those banner ads you see on websites), where the average CPC is under £1. As a rule of thumb, expect to invest a minimum of £1,000-£2,000 per month to see measurable results.
Let’s Talk ROI
To figure out if your Google Ads spend is worth it, you’ll need to calculate your Return on Investment (ROI). Here’s a simple formula to help you out:
ROI = (Revenue - Cost of goods sold) / Cost of goods sold
In the context of Google Ads, “Revenue” would be the total money earned from sales through your ads, and “Cost of goods sold” would be the total amount spent on Google Ads.
For example, if you spent £2,000 on Google Ads, and those ads brought in sales worth £10,000, your ROI would be 4, or 400%. Pretty good, right?
Increasing your ad spend can be a good idea if your ROI is positive. However, consider other factors such as your profit margins, budget constraints, and market conditions.
Google Ads is a valuable tool in your online marketing arsenal, but it’s not a “set it and forget it” kind of deal. Understanding how it works, how much to spend, and calculating your ROI will help you make informed decisions, maximising your ad spend and boosting your business’s visibility.
And remember, don’t be afraid to experiment and tweak your campaigns, it’s part of the game. Happy advertising!
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