MacAdam Lea
By MacAdam Lea | SEM | March 29, 2016

How Much Should I Spend On Google AdWords?

One of the most frequently asked questions I get when setting up a new AdWords campaign is “How much should I spend on AdWords to generate an optimal ROI?”. This can be a difficult question to answer, as Cost Per Click can vary wildly between industries and, due to the nature of AdWords’ bidding system, average Cost Per Click can be anything from $0.10 per click all the way up to $50.00 per click depending on what other companies are willing to bid.

For instance, a business that sells calculators for $100 won’t be willing to spend as much per click as a lawyer who is selling $50,000 in service hours. If the calculator company spends more than $100 per sale on AdWords they’ll start losing money, while the lawyer could spend $25,000 per sale and still have a positive ROI. If you’re setting up an AdWords campaign for the first time there are a number of considerations before deciding how much to spend on ads, and we’ll go over them in greater detail.

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Test Your Theories:

If you’ve never run a campaign on AdWords before then you’ll need to allocate some funds to test various keywords/campaigns in order to figure out how competitive the ad space is. I usually recommend that clients budget at least $1,000 for the first month of testing in AdWords (roughly $33 per day) since anything less probably isn’t going to generate enough traffic to establish a baseline ROI in the first month. It’s also important to not expect every new AdWords campaign to generate a positive ROI right off the bat. Most of the time it’s going to take at least a few weeks to get a new campaign working optimally.

Track Your Conversions:

Before you spend a dime in AdWords it’s important that you make sure to track which AdWords clicks lead to sales or leads (“Conversions”, as AdWords calls them). If you skip this crucial step, you’ll gather plenty of information on Clicks and Impressions, but you’ll have no way to tell if your ads result in an increased ROI. Tracking Conversions allows us to optimize ads and keyword bids based on how much money they’re actually making you, and avoid wasting spend on keywords that aren’t generating any value.

Set Your Conversion Value:

Sometimes your Conversions aren’t as clear as selling a specific product for a set dollar value (ecommerce, for example), but you’ll still want to set a value for them in AdWords. Whitepaper Downloads, Phone Calls and Form Fill Outs are all tracking even if they’re just a one step in a broader sales process. If you don’t establish how much each Conversion is worth, then some keywords can get over or undervalued as you make optimization changes.  

So when someone asks “How much should I spend on AdWords” the honest answer is “It depends”. So many different factors affect how much you’ll need to bid to compete in your ad space that actual testing is required to determine what works best for your company. My advice is to start slow and don’t blow too much of your advertising budget until you’ve determined what kind of ROI your campaigns are capable of generating. If you’re struggling to build out campaigns or set up conversion tracking, check out some of our other blogs for a more detailed run-down of how to set everything up in AdWords, or contact us and we’ll get your campaigns whipped into shape right away.

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