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What is Google AdWords? Everything You Need to Know

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Google Adwords: it’s the next step in your business’s advertising campaign.

And if you’re looking to reach that next level of business growth, you’ll want a strategic Adwords campaign in action.

But what exactly is Google Ads, and how does it work? How much should a business expect to pay per ad campaign?

We’ve put together the following guide that explains everything you need to know about getting started with Google Adwords.

What Are Google Ads? What Is Google AdWords?

Google Ads is a Google-based advertising system that allows businesses to reach their target audiences by competing for rankings on search engine results pages using AdWords.

Advertisements are created using the foundation of Google’s SEO algorithm: keywords. Businesses can select or define keywords and buy ads. When users type in the corresponding keyword, they’ll see the business’s advertisement.

Companies can choose their budget to create and the location where it will be shown to viewers. Once an ad campaign runs, they can see how successful it was with Google’s analytics tools.

In theory, companies can spend as much as they’d like on Google ads, as there is no cap. They also can opt-out from participating in AdWords at any time.

Google Ads began in 2000 when Google introduced the first self-service advertising option: AdWords. By 2013, the system had evolved into a mobile-friendly platform that was generating billions of dollars.

Buying Ad Placements: Google Ad Auction

Google Ads works similarly to an auction.

Say a user types a particular word or phrase into Google. Google then looks into that query for specific keywords, taking into account if anyone is bidding on those keywords.

If Google Ads advertisers are bidding on keywords in the search query, it initiates an auction. The software calculates each contending ad’s rank to determine if and where an ad will be placed on the search engine results page.

Here’s the formula for calculating Ad Rank:

Ad Rank = CPC Bid x Quality Score

Your CPC bid is the maximum amount you’re willing to spend per click. Your Quality Score is a metric created by Google that determines the quality and relevance of your ads.

Once Google calculates your Quality Score and Ad Rank, it will use another formula to determine the cost of your ad.

Your price = the ad rank of the person below you / your quality score + $0.01

This formula lets you create an effective Google AdWord strategy, regardless of the size or budget of your business (more on this later).

What Are the Benefits of Google Adwords?

From generating visibility quickly to providing a flexible option, Google AdWords provides a variety of benefits that have unsurprisingly made it a popular ad strategy for small and global businesses alike.

Works Faster Than SEO

Any good digital marketing plan involves an SEO strategy. But SEO is a long-term investment. You may not see the results of your SEO strategy for months.

If you’re launching a new product, trying to generate buzz around your brand, or even just throwing off a competitor, a Google AdWords campaign is the realistic and cost-effective option for outranking other sites.

Builds Brand Awareness

Aside from boosting traffic and generating more clicks, Google Adwords is a great way to get more people interested in your brand.

Just seeing the name of your company on the search engine results page will keep you at the forefront of consumers’ minds.

To test this, Google ran a study with partner Ipsos. It asked consumers to recall a target brand that they saw after conducting Google searches for certain category keywords.

The test group named recalled the target brand shown at an average of 6.6 points more than the control group, which is the equivalent of an 80% increase in top-of-mind awareness.

Reconnects With Remarketing

You likely have window shoppers on your website. How many people visit your site every day and fill up their shopping cart, never to make a purchase?

Research from the Baymard Institute shows that customers abandon their shopping carts, on average, almost 70% of the time.

Remarketing works by keeping track of all the users who have visited your site and following up with another marketing campaign to re-engage them with your content.

For instance, say a lead spends 3 minutes on your website then exits without purchasing anything. A few hours later, he visits a different website, only to find a banner at the top of the page full of items from the abandoned cart on your website.

Remarketing is a type of segmentation that can be applied with other data you have about users, like gender and purchase history. Using this data to customize your ad approach will increase engagement and click-through rate, as 71% of consumers prefer personalized ads.

Measures Your Performance

Measuring the outcome of your advertisements is key to determining their success and what your next steps should be.

Google Adwords provides numerous metrics for learning about the effectiveness of your ads, including the following.

  • Who clicked on your ad
  • Leads generated
  • Traffic from ads to website
  • Cost per lead
  • Most successful keywords

With this information, you can see what worked and what didn’t then tweak your next campaigns.

Works With Your Schedule

Successful advertising reaches the right person at the right time with the right message. With Google AdWords, doing all three doesn’t have to be difficult.

Google AdWords let you decide the exact locations for promoting your ad. And unlike the typical retainer fee or minimum monthly service fulfillment that an advertising agency may require, Google Ads are 100% self-paced.

You can even schedule your ads to appear with specific instructions.

For instance, say your brand is a local retailer that offers deals on weekends. You can schedule ads to appear on weekend mornings or when deals are going on, and turn off ads from appearing when your store isn’t open.

How Much Does Google Adwords Cost per Month? What Are The Factors That Determine Google Ad Cost

If you’re curious about the Google Adwords cost for a campaign, it’s a difficult question to answer. 

Numerous factors go into the cost of an ad campaign, from chosen factors like your industry and your daily budget to external factors like how Google ranks your brand’s online credibility.

Keywords Chosen

The most important factor in your ad strategy, hands down, is any keyword you use. PPC advertising is similar to print advertising: you spend more on an advertisement in a national newspaper than a local magazine.

In terms of keywords, you’d pay more for the most popular keywords and less for the ones that aren’t searched as frequently. The competition and commercial intent of a keyword determine its popularity.

In super-competitive markets, keywords like “lawyer” and “insurance” can cost dozens of times more than more niche occupations. In these cases, CPC could cost you $50.

And that adds up fast – just 50 clicks per day at a cost of $50 per click would equal $75,000 a month.

Quality Rank

Your Quality Score has a large influence on the cost of your Google advertising campaigns. It’s made up of variables including your overall click-through rate (CTR), your landing page quality and relevance, the relevance of each keyword, and your historical Google Ads account performance.

Strong Quality Scores mean a lower CPC and higher rankings when you do pay for ads. Lower Quality Scores mean more expensive CPC and less optimal positions.

Quality Scores neutralize Google’s ad campaign field because they prioritize ad relevancy and success over money spent.

Campaigns backed by a long history of successful Google Adwords campaigns will have a better Quality Score. Campaigns from newer brands or ones that Google views as less trustworthy will have to pay more per click.

This means that a company can pay less than another business and still get a higher ad placement for a certain keyword because of a higher Quality Score. Small-budget businesses can advertise in the same leagues as big-budget businesses.

In addition to lowering your CPC, strong Quality Scores will lower your site’s cost per conversion, so it’s worth it to optimize them in the long run.

Improving your Quality Score involves similar practices to improving your site’s SEO scores. You’ll want to optimize your landing page and refine the text throughout your website. Keywords research and organization will ensure you’re using the most relevant search terms correctly.

Daily Budget

Ultimately, your Google AdWords budget will depend on your spending limit. There’s no rule for how much to spend on Google AdWords. It will let you spend as much as you’d like on ads, but you don’t need an expensive ad campaign to be successful with the service.

Each of your campaigns will have its own settings where you can control how much you’ll spend on the particular campaign per day. Google also lets you set a monthly spend limit so your ad spending will be regulated over a longer period of time.

Here’s how your budget gets spent.

Say you have an ad with a maximum CPC of $1.00, and you want to receive 500 ad clicks a day. Multiplying $1.00 by 500, and your daily ad budget is $500.

Your actual daily spending could vary, as the amounts that you’ll be charged per click will depend on the other competitors. If you set your maximum CPC to $1.00, you’ll never pay more than that, but you could end up paying only $.50 each for 100 of those clicks.

Business Size

Again, every business is different when it comes to Google Ad spending. Large businesses may spend $40 million a year on Google Adwords, while small businesses may spend up to $20,000.

And while it may seem frustrating that there’s no one-size-fits-all formula you can use to properly budget a Google Adwords campaign, it’s actually a good thing.

It shows that you have a responsive system with the flexibility to increase your advertising as your business expands or pauses if your business stagnates.

Agency Cost

You might hire an agency to handle your PPC ad work for you. If you want to minimize time spent on ad campaigns while maximizing your profit returns, a Google AdWords expert can give you the kind of numbers you’re looking for.

Agencies have collective experience extending back to the origins of Google’s PPC system. They understand how it’s changed and what both search engines and users are looking for.

Your ad spending will change if you hire an agency, though. Agencies will usually charge a percentage of your ad spend, so you’ll need to choose wisely.

Is Google AdWords Right for My Business?

An AdWords campaign is a lucrative digital marketing option for businesses who are attracted to its pricing model that charges only when you see results.

However, that doesn’t make it the right choice for every business.

If you can answer “yes” to the following questions, a Google AdWords campaign is likely a good next step for your business.

Is Your Audience Located Online?

If you’re a small local business or one that emphasizes a personal touch, most of your audience may not be located online.

You’ll need a strong based on digital consumers in order to benefit from Google Adword services.

Are Relevant Keywords Being Searched?

Along those lines, do some keyword research into search queries that may be relevant to your industry. You’ll want at least 500 searches per month for a particular keyword or phrase if you want to generate any sort of results with an Adwords campaign.

Most likely, you’ll find at least a few keywords that generate enough search volume to create an Adwords campaign. You’ll have to consider the number of campaigns your want to run and if you want to optimize other keywords first.

Are Online Publications Writing About Topics Relevant to Your Industry or Service?

Google Ads are most necessary when there’s competition for ranking positions. When online publications write about topics that use your keywords, they’ve become competition.

Some publications are better than others. Small-time operations likely won’t affect your position in search engine rankings, but popular magazines or news sources that use your keywords could potentially outrank you. An ad campaign would help you stay on the radar.

Are Your Competitors Investing in Advertisements?

If only organic sources like blogs and magazines are competing with you for keywords, there’s still a chance you could be able to boost your rankings with SEO methods alone.

However, once paid advertising enters the equation, it becomes more complicated. Even if you’re the second result on a search page, an ad will push you down for a more visible spot.

At this point, it’s wise to create your own AdWords campaign to restore your competitive edge.

How to Choose a Google Adwords Agency

It’s worth it to take the time to find the perfect Adwords agency. Here are a few criteria you should consider when researching and selecting agencies.

Identify Your Goals

Your ad campaign will be the most successful if you align your business’s values with the goals of the campaign. An agency can support you if you identify your goals and decide your priorities.

Here are some goals that you could present to an agency.

  • More website traffic
  • Buzz for a product launch
  • Increased brand awareness
  • Higher e-commerce sales
  • Better leads
  • Expanded email subscriber list

This is far from an exhaustive list – take a few hours before you start meeting with agencies to write down your own agenda. You’ll be clear from the start about what you want and how the agency can help you get there.

The goals listed above were generic. When you set your goals, make them measurable. Presenting specific time frames and metrics to an agency will allow them to determine if they can realistically meet your expectations.

Think About Your Industry

You may find an industry that has done quality ads that you like, and that’s a great reason for selecting an agency.

However, an industry with specialization in your niche may be able to give you better results, especially in highly competitive industries.

The keywords insurance, loans, and attorneys are some of the most searched terms. You’ll want your agency to understand the nuances of the market and be able to position your brand as a unique solution within ad campaigns.

Consider Going Local

There’s nothing like working with a team that understands your target market firsthand. And with local SEO searches increasing by 150% in recent years, it’s more important than ever for your agency to personalize the AdWord experience based on your target market’s location.

You may want to make locality a factor in your agency search. This doesn’t mean you have to rule out the expertise of remote PPC management companies.

However, you should these companies how they’ll match the personal experience that a smaller, local agency is known to provide.

Look at Other Customer Results

Get a better idea of what an agency can do for your business by looking at its case studies and other customer results. You’re not looking for a hard number spent on the campaign or a specific revenue amount.

Instead, you’ll want to learn about the ROI from a certain campaign, which is the true indicator of an ad’s success. Often, an agency running an effective Google Adwords campaign will generate an ROI of about 4x.

If this number is significantly higher or lower for a particular client, learn about the company’s approach in that situation and how it compares to similar strategies in that industry.

Dip Deep Into Technology

An ad agency may be the expert, but that doesn’t mean you can’t do your own research beforehand.

Coming in with an understanding of the software and technological approaches to AdWords both puts you in a better negotiation position and helps you determine if a company is as advanced as it says it is.

Don’t be afraid to ask a prospective agency all about their methods. What is their primary analytics tool? What reporting tools do they use, and how would you access those reports?

Most importantly, what tool do they use for keyword research? As keyword research is the heart of your ad campaign, your agency should be using the best software out there. Stay up to date on industry tech developments before you go into the agency selection process.

Think ROI, Not Pricing

Pricing shouldn’t be the deciding factor when you’re deciding on an agency to generate your Adwords campaign. Money spent on a campaign doesn’t necessarily mean anything by itself, and neither does revenue generated.

For a more comprehensive understanding of what an agency brings to the table, you’ll want to look at the ROI.

More than anything, you’ll want an agency that’s transparent about its pricing. Some agencies may have hidden retainers or unexpected fees.

And just because an agency has the lowest fees doesn’t mean they’ll do a bad job, and an industry with high charges doesn’t always guarantee results either.

Getting Started With Google Ads

Google Ads is more than just a part of your digital marketing strategy –  it could be the tool that transforms your business.

We’re more than happy to answer your questions about ads and help you to open your Google Adwords account.

Contact our team to learn more about crafting the perfect ad strategy for your business.

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