Google Adwords Budget and Costs are the most frequently asked topics since Doxadigital provides Google ads advertising services . This article is created to answer the full range of our experience on this subject.
How Much Does Google Adwords Cost?
The cost of Google Adwords varies because Google uses an auction system (Auction). You must perform ad optimization to appear in the ad unit in the most cost efficient manner. In Indonesia, click fees start from 800 rupiah on Search, 150 rupiah on Display and 30 rupiah per view on Video.
But as an advertiser, you have control over your daily ad budget and the maximum cost you are willing to pay for each click. It’s just that, if you make an offer that is too low, for example 100 rupiah per click, even though the system accepts your offer, it is unlikely that your ad will appear because overall your ad is considered to have an ad rank ( Ad Rank ) which is very low. So as a user of your Google ad, you must be able to determine at what figure the cost of your ad is enough to give you an advantage.
How does the cost-per-click advertising on Google Adwords work?
In Google’s auction system, Google uses a parameter called Ad Rank to determine ad position. Ad-Rank is built with 3 other parameters, namely Maximum Cost Per-Click (Max CPC / CPC), Quality Score, and Extension Format. The calculation process is divided into 2, namely calculating the new Ad-Rank and then calculating the paid Clicks
Step 1: Calculating Ad Rank in the Auction
Ad Rank = Max CPC xf (QS, Ad Format)
Max CPC = Maximum Cost-per-click that advertisers are willing to pay
QS = Quality Score (Numbers 1-10)
Ad Format = Quality of Use of Ad Formats and Ad Extensions
What is the Quality Score in Google Ads?
This is a report on the quality score of the keyword’s performance, the score of this report is on a scale of 1-10 where 1 is the worst and 10 is the best. This figure stacking of three elements, namely:
Rate Click Through Rate (CTR) – What is the number of ad impressions than those who click on ads
Relevance Ads (Ads Relevance) – The level of relevance of your keywords and your ad in the search results
Performance Page Landing ( Landing Page Experience ) – How are visitors performing on the page
For a simple calculation simulation, we can assume that the QS and Ad Format functions are one unit (we consider it in one QS)
For example, in one auction, there are 5 advertisers with different bidding costs and quality scores, here is the simulation:
|Max CPC (in Rupiah)||QS||Ad Rank|
Note: in real Google calculations, all Bids are made in USD because the calculation is global (international), the figure above uses Rupiah for simulation needs
In the simulation above we can see several things:
- Anni with the biggest Bid, not the one with the best Ad Rank
- Viktor with the highest QS (Quality Score), also doesn’t have the best Ad Rank
In this way the Google Ads system is made fairer because it is not the most fund that will appear above, but several aspects of optimization are needed so that one ad has a high Ad Rank value.
Table based on Ad-Rank
|Max CPC (in Rupiah)||QS||Ad Rank|
Step 2: Calculating the cost of Google Ad Clicks to be paid
After calculating the Ad Rank, what is the formula for the advertising costs to be paid? Even if you have a high bid amount value, it is not a number you will be sure to pay. In most cases, you pay less than your maximum bid (bid) cost.
Your advertising cost formula:
Your Fees = (AdRank Your Bottom Position / QS) + 1 cent (USD)
Assuming 1 USD = 15000 rupiah, it means that the additional cost of 1 cent is equivalent to 150 rupiah , using the simulation above, how is the calculation.
Click cost table
|Max CPC (in Rupiah)||QS||Ad Rank||Advertising Costs|
|Viktor||1000||10||10000||(Depending on the bottom position, assuming 1000)|
A simple way of calculating like this, take for example Iwan:
Advertising Costs = (Ad Rank value below / QS) +150
= (12000/7) +150
= 1864 (rounding)
Several points in the simulation above:
- The cheapest click costs are in position 3 (Iwan)
- Position 1 (Ratna) is the second cheapest cost
This is how the cost calculation is done.
How much do Google Adwords ads cost?
By using Google Ads, cost reporting can be seen from several points of view, including:
- Based on the basic system
- Cost per click (CPC / Cost per Click), the fee charged by advertisers when an ad is clicked to go to your site, applies to Google Search and Google Display
- Cost per 1000 views (CPM / Cost per Mile), The fee that advertisers charge when advertisements are displayed on a visitor’s screen. Valid in Google Display channels
- Cost per watch (CPV / Cost per View), the cost charged by advertisers when video ads are viewed for min. 30 seconds or when the ad is finished
- Based on formulas and functions
- Cost per conversion (Cost per conversion), sometimes also known as the cost of acquisition (Cost per Acquisition / CPA), is the cost needed to get 1 conversion / goal
As an advertiser, it’s a good idea to focus on Cost per Conversion, because the best thing about advertising is not cheap advertising, but ads that have a financial impact on your business.
In advertising, you will usually meet the term ROAS which stands for Return On Ads Spend , which is the focus of advertising that is compared between advertising costs and gross revenue. ROAS is easier to measure than the calculation with the ROI approach which stands for Return On Investment, because the calculation of ROI involves working capital and the price of product raw materials. ROAS target is one of the financing targets that can be used with Machine Learning in Google Ads
What is the advertising budget needed to advertise on Google Adwords?
Google frees advertisers to advertise on any budget. You can advertise starting from 100 thousand rupiah to 100 million rupiah even more. The Google platform is open to all businesses from micro to large enterprises.
To set maximum results, in our experience, you need a minimum initial budget of 5 million rupiah, because:
- Your ad will not be optimal immediately on the first day.
It takes a lot of time to do ad optimization, the initial month is usually the month where you will do many ad trials with a variety of targets. For a small fee, the ad trials are also very limited.
- Google Smart Engine, requires a lot of data to be optimal.
Google has a sophisticated smart machine, but it runs when a lot of data is processed. Unfortunately, if advertising funds are very limited, this sophisticated function cannot run optimally.
What are some tips for setting a good initial ad budget?
- Determine your regular marketing costs, spend 30-50% of it on Google advertising, or
- Use a budget of 5 million rupiah to start your advertising
How to Control Google Adwords Ad Budget?
There are many controls on the use of ad budgets in Google Ads, some of the features include:
- Daily Budget, you can set a maximum daily cost for your campaign. However, in practice Google can increase the daily budget automatically up to 2 times, but if it is calculated in 1 month, your daily budget will match the numbers you will set.
- Advertise based on a certain time (Ads Scheduling), you can set what time your ad will run for your budget optimization.
- Advertise based Device / Device specific, you can advertise on any Desktop, Tablet only, Smartphone, or even a combination of all three. You can even make different bids on different devices
For advertising transparency, your Google Ads account is also provided with clear detailed payment reports.