AdWords gives you control over your advertising costs and there’s no minimum amount that you have to spend. Instead, you set a daily budget and choose how you’ll spend your money.
How Costs Are Calculated
AdWords gives you control over your advertising costs. There’s no minimum amount that you have to spend. You set an average daily budget and choose how you’ll spend your money. Go to your account at https://adwords.google.com to see full reports of your advertising costs and billing history anytime.
Every time someone searches on Google, AdWords runs an auction to determine the ads that show on the search results page, and their rank on the page. To place your ads in this auction, you first have to decide what type of customer action you’d like to pay for.
For example, you might choose to pay for the following actions:
- When someone clicks on your ad (cost-per-click or CPC)
- How frequently your ads are shown (cost-per-impression or CPM; available for Display Network campaigns only)
- How many conversions you receive (cost-per-acquisition or CPA)
These are called your bidding options. Most people starting out in AdWords use the basic CPC bidding option, which means they accrue costs based on the number of clicks they get on their ads.
If you use this option, the amount you’re charged per click depends in part on the maximum cost per- click bid you set in your account, also called maximum CPC bid. This represents the highest amount that you’ll ever pay for an ad click (unless you’re setting bid adjustments, or usingEnhanced CPC). In fact, you’ll be charged only the amount necessary to keep your ad at its position on the page.
Choosing a bidding strategy
Choosing how you’ll spend your money means choosing how you’d like to bid. Try choosing a bidding strategy based on your goals, such as whether you want to focus on getting clicks, impressions, or conversions.
We’ll go over your bidding options in more detail later, but here’s an overview of the strategies:
- Cost-per-click (CPC): If you want to focus on clicks on your ads and drive traffic to your website, you’ll want to use CPC bidding.
- Cost-per-thousand impressions (CPM): If you want to focus on impressions — the number of times your ad shows — and increase awareness of your brand, you’ll want to use CPM bidding. Note that CPM bidding is available for Display Network campaigns only.
- Cost-per-acquisition (CPA): If you want to focus on conversions — which is when people take a specific action on your website after clicking one of your ads — you’ll want to use CPA bidding.
Setting a daily budget
Your daily budget is the amount you’re willing to spend each day, on average, for each ad campaign in your account. The amount is entirely up to you, and you can edit it whenever you like.
When you set your bids, you set the maximum amount you’re willing to pay for either 1 click on your ad, 1,000 ad impressions, or 1 conversion. Your actual costs will likely vary from auction to auction. But even though your actual costs may vary, your daily budget puts a limit on how much you can accrue in costs over the average number of days in a month (30.4).
For more guidance on setting the right budgets and bids, check out this video:
How much you’re charged
The final amount you’re charged depends on what type of bidding strategy you choose.
If you’re using CPC or CPM bidding, the actual amount you’ll be charged is no more than what’s needed for your ad to appear higher than the advertiser immediately below you.
If you’re using CPA bidding, the actual amount you’ll be charged might exceed your specific bid because the actual amount depends on factors outside of Google’s control, such as changes to your website or ads, or increased competition in ad auctions. Keep in mind that our system is designed to adjust over time, so the longer you use CPA bidding, the less likely it is that your actual CPA will exceed your specific bid.
Example
Antoine advises that Fiona’s ad campaign should use the CPM bidding strategy. After Antoine explains how CPM bidding works, Fiona wants to know how much she’ll be charged.
Let’s say the maximum amount Fiona wants to bid is US$2.00 and other advertisers’ bids for the same ad position are US$1.50 and US$1.75. Fiona won’t be charged more than what’s needed for her ads to appear higher than the advertiser bidding US$1.75.
Focus on clicks – Bidding Option
If you use the cost-per-click bidding option, you set a maximum CPC bid for your ads. You can always lower your bid amount, but if you do, it may cause your ads to show up in a lower position on the first page of search results, to move from the top to the side or bottom position, or to be removed from the first page search results. In general, a higher maximum CPC bid can allow your ad to show at a higher position on the page.
Tip
You can have your bids automatically updated, based on the daily budget you’ve set. Then the system will actively seek out the most clicks possible given your budget. This option sits under focus on clicks: AdWords will set my bids to help maximize clicks within my target budget. AdWords will set my bids to help maximize clicks within my target budget. Be careful – this is a form of automatic bidding.
Create more relevant ads to get the most for your money
High-quality keywords and ads are an important way to make sure that you’re getting the most for your money.
You can raise your maximum CPC bid to try to get your ad to show at a higher position on the page. But you can also raise your ad’s position by improving the quality of your ads, keywords, and settings, without increasing costs.
To encourage high-quality ads, Google uses a measurement called Quality Score. The higher the quality of your ad, the less you pay for a given ad position, and vice versa.
Example
Let’s say your maximum CPC bid is $2. Meanwhile, your competitor has a maximum CPC bid of $3 but the quality of his ads are below average. Because of the higher quality of your ads, your ad could actually show in a higher spot on the page, even though your bid is lower.
How your ad’s relevance affects your costs and performance.
Additional study materials
- Learn more about the basics of bidding.
- Find out about setting a budget.