How Much Do Google Ads Cost? This is What You Need to Understand

Perosn Handling Google Ads Works on a Laptop

When you’re trying to develop an Internet marketing strategy, the name of the game is targeted traffic. Overall traffic numbers and monthly visitor figures simply aren’t relevant if those visitors aren’t interested in the products that you’re selling.

One of the best ways to get that targeted traffic is by using pay per click advertising services like Google Ads to redirect interested traffic from search engines to your website. In this article, we’ll answer the question of how much do Google Ads cost by breaking down the Google Ads cost formula and also providing tips on how to optimize your pay per click advertising strategy.

What is Pay Per Click Advertising?

Before we get into the nitty-gritty of the cost of Google Ads, let’s first understand exactly how pay per click advertising works. In a nutshell, this advertising strategy is exactly what its name makes it sound like.


It’s all about Google sending paid traffic to your website in exchange for a certain cost per click. This traffic is obviously extremely targeted to your industry, which makes the SEO services and PPC services that help you get this traffic worth it.

There’s no doubt that you’ve seen Google Ads in effect on the web already. They’re all over the Internet. The most obvious location is in Google’s most famous tool, its search engine. Whenever you search a keyword, there are 2-3+ highlighted listings right at the very top.

These featured listings were paid for and every time a user clicks one of those listings, the company that bought that listing spot pays a certain amount of money. That certain amount of money is known as the cost per click and is what we’ll be investigating here today.

The cost per click is determined by two factors that we’ll break down for you. The first factor is the quality score and the second factor is the ad rank.

Quality Score

Your quality score is a subjective rating that Google imposes on your listing relative to the keyword that you are paying to be featured on. There are many further factors that go into determining your quality score, but as a general rule, you want your quality score to be as high as possible because that way Google will minimize your cost per click.

The first factor that goes into determining your quality score is click-through rate. How often do users actually click-through to your website when they see your ad? A high click-through rate shows Google that users think your website can solve the problem that they’re looking for. Remember that Google also wants you to have a high click-through rate so that they can supply more clicks to you (which means more money for them given the pay per click model!).

The quality of your landing page also has a big impact on your quality score. Google’s spiders will crawl your page to analyze it and determine what kind of topics it is most relevant too. This is the same process that Google undertakes when determining the organic rank of website listings for various search times.

The higher quality your landing page (high keyword relevance, low bounce rate, etc.), the better your quality score. 

The Ad Rank

The ad rank is a fairly simple concept that can be described by a simple equation. Your ad rank is equal to your quality score multiplied by your maximum bid.

So let’s say that your listing was determined to have a quality score of 20/20 based on Google’s spiders’ results. Furthermore, let’s say that you decided that the maximum amount you’re willing to pay per click is $4.

The equation gives us that your ad rank is equal to 20 * $4 = 80.

The Overall Formula

So how do ad rank and quality score work together in order to determine the final cost per click?

Well, the overall formula takes into account the ad rank of the listing below you. So let’s continue with the previous example wherein you have a quality score of 20, a max bid of $4, and an overall ad rank of 80.

If the listing right below you has a max bid of $10, but a quality score of 4/20, their ad rank is going to be 4 * $10 = 40.

The final formula to determine your cost per click is (the ad rank of the person below you)/(your quality score) + $0.01.

So in this case, your final cost would work out to 40/20 + $0.01. This cost would be $2.01. See how you were able to score a cost that was lower than your max bid of $4 because of the poor quality score of the listing below you?

How to Optimize Your Pay Per Click Strategy

Now that you know how the cost per click game works, it’s now time to learn how you can optimize your pay per click strategy in order to reap the maximum amount of targeted traffic (and thus customers) without breaking the bank. 

The first thing to keep in mind is to know your customer lifetime value and conversion rate. If you profit an average of $100 off of each customer and you convert 10% of the traffic that is funneled into a specific landing page, then every time someone visits your landing page you’re going to make $100 * 10% = $10.

Knowing this number allows you to set your max bid in your pay per click strategy. Any more than $10, and you’re going to be losing money every time someone clicks your link.

The second most important tip provided is to constantly A/B test your ads. Don’t settle for one headline/blurb. Continually test the text that you’re displaying in the advertising strategy to get the highest click-through rate possible. The higher your click-through rate, the higher your quality score and the lower that you’ll be paying per click.

Understanding How Much Do Google Ads Cost

Know that you have a solid understanding of how much do Google Ads cost, you’re ready to get out there and start putting your pay per click strategy into action. Don’t forget these tips — make sure to always improve your ads and know the metrics of how much each customer is worth to your business.

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