How Much Should I Spend on Google Ads? A Guide for Advertisers

TL;DR:

• If you are wondering how much to invest in a Google Ads campaign, one of the best ways to do this is to get an idea of the average amount you might get charged for a click.

• Use Keyword Planner to get an estimated average on the CPC amount for your Search Network campaigns.

• It’s important to remember how your budget is actually spent based on a variety of factors such as your Quality Score, Ad Rank, keywords targeted, etc.

• Always start with a test budget, understand how the auction and bidding process works and tweak your campaigns accordingly.

• Start with $10–$50/day for local/small businesses and $50–$150/day for competitive or e-commerce niches.

Introduction

Over 1 million businesses worldwide use Google Ads to market their products and services—demonstrating the effectiveness of the platform!

With targeted traffic, boosted online presence and achieving marketing goals–Google Ads is one of the most sought after ad platforms today. 

As more businesses kickstart their marketing journey, they look towards Google Ads–the kingpin of the marketing industry. Through their journey a natural question arises, “How much should I spend on Google Ads?”

The answer: Unfortunately, there is no one size fits all solution to the question. 

A Google Ads budget can range from $10 to $50 per day to $7000 or more per month. This is all determined by the industry you are in, the competition of your business, and goals. 

A generic overview reveals that most businesses spend anywhere from $1500 to $30000 monthly, with average costs between $2 to $4 per click on the Search Network. 

This blog explores how to choose the right budget type, estimating your daily spend, the factors affecting it and ultimately deciding if Google Ads is affordable for your business. 

Understanding Google Ads Budgeting

Before we delve into determining your Google Ads budget, we have to do our due diligence. We must understand how it all works first. 

Google Ads lets advertisers set an average daily budget. It then decides how that budget is spent per day based on its algorithm. 

Average Daily Budget, Monthly Spending Limit, Daily Spending Limit & Overdelivery 

An average daily budget is the amount you choose to spend per day on each ad campaign. It is multiplied by 30.4 to get the monthly spending limit (average number of days in a month) and spent per day. Google will not charge you more than 30.4 times your daily budget. We will talk about Daily Budget Overspend later on. 

Let’s also understand the concept of ‘overdelivery’, daily spending limit and monthly spending limit.  

Overdelivery – This essentially means your campaign might spend a little more than your average daily budget on some days but the total will never exceed 30.4 times your daily budget. It would spend more because the ads would show up more often in a day depending on opportunity, traffic, and days you would likely to get more clicks and conversions. 

Daily spending limit – Overdelivery works in tandem with daily spending limit. A daily spending limit is the maximum amount you can be billed for in a day. It is 2 times your average daily budget. 

Note: Google sometimes applies a daily spending limit by default to certain Google Ads accounts. Refer to this link to understand why.

Monthly spending limit – As the name suggests, a monthly spending limit is the maximum amount you will spend in a month. 

Mind you, average daily budget, daily spending limit and monthly spending limit all work hand in hand. What determines your overall budget is the average daily budget, so choose that wisely. 

Let’s see how it all plays out: 

Say you set your average daily budget for an ad campaign at $90 and select an individual campaign budget. An individual campaign budget means the budget is exclusively set for one campaign. A shared budget is an amount allocated across multiple campaigns. 

As mentioned previously, Google multiplies the budget set by the number of average days in a month. 

$90×30.4 = $2736

This means that your Google Ads campaign will cost you $2736 (Google does not round up figures). 

Your average daily budget = $90 

Monthly spending limit = $2736 

Daily spending limit: $90×2 = $180 i.e. your daily spending limit will never exceed $180. 

Day 1: $120

Day 2: $60

Day 3: $90

… (varies daily)

Total monthly spend: Will not exceed $2,736

Daily spend: Will not exceed $180 

Account Budgets 

An account budget is typically used by advertising agencies or larger accounts who pay by monthly invoicing or automatic payments. The account budget is the spending limit for the entire account, not just individual campaigns. This feature is typically found in Google Ads Manager Accounts (My Client Center MCC). 

Let’s understand how an account budget works with the other budgets and spending limits we have discussed: 

Say you have an MCC account, and you are running ad campaigns for 2 brands. 

Each brand’s account would have an account budget. 

Brand A’s account budget – $5000

You are running 5 campaigns for them. 

You decide to set an Account Budget of $5,000 for the entire account for March 1–March 31. You will then have to decide how you want to distribute that amount for each campaign. 

Campaign Name	Average Daily Budget	Monthly Daily Spend (Daily x 30.4)
Campaign A	$50/Day	$1520
Campaign B	$40/Day	$1216
Campaign C	$30/Day	$912
Campaign D	$20/Day	$608
Campaign E	$60/Day	$1824
Total Daily Spend Potential	$200/Day	$6080

Without an account budget you would end up spending – $200/day x 30.4 days = $6,080

With an account budget you would spend – $5000. Campaigns will run till you hit the limit of $5000 after which they will be temporarily paused. Which highlights the importance of account budgets for agencies. 

The budget breakdown would be similarly calculated for Brand B, capping their limit at $10,000.

What happens if you exceed or underspend your budget?

As mentioned above, Google will never exceed your total monthly spend. It can and will spend more than your average daily budget, but the total amount at the end of the month would never exceed your base average daily budget times 30.4.

Yes it is also possible to underspend your budget. This happens due to several reasons, such as low search volume, low CPC bids, ad schedule restrictions, low quality score or ad rank, learning phase for new campaigns, or a shared budget. 

The remaining unspent budget simply stays in your account and the balance remains available as a credit. 

Factors That Influence Your Google Ads Budget 

So now that you have a clear understanding of the budgeting system in Google Ads–let’s understand how exactly you must set your budget. 

A budget has to be strategically thought out. This section will only be mentioning absolute and objective factors i.e. universal to all advertisers. 

Other subjective or external factors such trends, customer lifecycle, how you manage your account, your marketing budget, agency costs differ from business to business and thus can’t be generalized. 

Industry Benchmarks

One of the biggest factors influencing your Google Ads budget or cost are industry benchmarks. Each industry has an Average Cost Per Click (ACPC), which ultimately determines how much budget you need to run your ads. 

To understand this better we have to know how Cost Per Click (CPC) affects the ad auction and bidding. CPC has a direct impact on your advertising budget because it is the amount of money you pay for each click on your ad. A higher CPC means you will pay more to achieve the same number of clicks, and the opposite is also true. 

Now remember, you aren’t the only one running ads–you have competitors within your industry running ads too. This is where ad auctions come into play. In Google Ads, every ad space has an auction, the highest bids and best quality ads get the spot. You set a maximum bid, and pay a cent more than the next highest bid. 

But does this mean the highest bidder gets a better ad placement? No. Google has made it clear that even if your competition bids higher than you, you can still ‘win’ the ad space at a lower price. Google uses multiple other factors to determine who gets the spot (not just the bid) such as ad quality, relevant keywords, etc. 

So how does everything connect together? 

Your CPC is determined by the number of competitors in your industry. When many advertisers compete for the same keywords, the bidding process drives up the price. 

For example, the Attorneys & Legal Services has an average CPC of $6.75 indicating there are many advertisers in this niche. Whereas, the average CPC for the travel & hospitality industry is $1.53 indicating there are a relatively lesser number of advertisers in this niche. 

Pro Tip: Keywords have different intents such as informational, navigational, commercial, and transactional. Commercial and transactional keyword intents have higher conversion and thus attract a higher CPC. So figuring out your targeted keywords’ intent can help gauge your budget.

Here is a breakdown of the Average CPC, industry wise for Search Ads and The Google Display Network (GDN). 

Industry	Average CPC (Search)	Average CPC (GDN)
Advocacy	$1.43	$0.62
Auto	$2.46	$0.58
B2B	$3.33	$0.79
Consumer Services	$6.40	$0.81
Dating & Personals	$2.78	$1.49
E-commerce	$1.16	$0.45
Education	$2.40	$0.47
Employment Services	$2.04	$0.78
Finance & Insurance	$3.44	$0.86
Health & Medical	$2.62	$0.63
Home Goods	$2.94	$0.60
Industrial Services	$2.56	$0.54
Legal	$6.75	$0.72
Real Estate	$2.37	$0.75
Technology	$3.80	$0.51
Travel & Hospitality	$1.53	$0.44

(Source: WordStream)

Competition Level

Competition level also affects your budget. As we discussed in the previous subsection, certain industries have higher CPCs indicating there are more advertisers running ads for that niche. 

Competition level is essentially the number of advertisers bidding for a particular keyword. When you access Google Keyword Planner, you will be shown the level of competition a keyword has. It is broken down into three categories:

• Low – Good for tight budgets and less competitive in nature. 
• Medium – Good for a balanced budget, with a focus on ad quality. 
• High – Requires a bigger budget or a higher Quality Score to compete. 

In the screenshot above, we performed a search on the keyword ‘budget hotels’. Google Keyword Planner then gave us keyword ideas with different metrics. The competition level is highlighted as well. 

Depending on your budget, you can target different competition level keywords. 

Now a question comes to mind: Does the competition level of a keyword have any correlation with the search volume?

No it does not. Referring back to the screenshot shared above, a medium competition level keyword has a search volume of 1,22,000 and a low competition level keyword has a search volume of 74,000. 

Target Audience and Location 

Target audience and location affect how your budget is spent. 

By targeting certain locations your ads can reach the right audiences, thus improving your Return On Investment (ROI). 

Google Ads allows users to target countries, regions within a country, or a radius around a location. Users can also target regions where customers have shown interest. 

The following targeting options are available: 

• Broad geo targeting – Target customers in specific locations and specifically potential customers that expressed interest in your location. 
• Location targeting – Location targeting allows you to target specific locations but the type of targeting varies by country.
• Locations of interest – This an optional ad group level feature. It targets leads who are searching for or have expressed in your offerings. 
• Targeting multiple locations in bulk.  

With regards to targeting specific audiences, if many advertisers are targeting the same audiences CPC goes up. For example, everyone wants to reach “women aged 25–34 interested in fashion” — that drives up cost. Google may increase CPC, if audiences are more likely to convert but this is a good thing since you will have a better conversion rate. 

Users can create audience segments which are a group of people that have shared interests, behaviors, and characteristics. These segments or lists allow you to target ads to specific audiences to improve your overall campaign performance. 

Quality Score* (Important)

A quality score is a metric that assesses your ad quality on a scale of 1 to 10. It measures the quality and relevance of your landing pages, ads, keywords and landing page experience. In essence, it compares your ad quality to other advertisers. Quality Score has a direct impact on your CPC, ad rank and overall campaign performance. 

A higher quality score means your ads will get better ad placements than others and your CPC will be lower. What this means is that you can outrank your competitors with lower bids if you have a higher Quality Score. It is absolutely essential that you work on improving your quality score as this could help you get conversions with a small scale budget. 

If you have existing campaigns or are running test campaigns, you can review all the metrics related to your Quality Score. This will help you tweak your campaign budget as needed. 

To check your Quality Score: Navigate to Assets > Keywords > Click on Columns > Modify Columns > All Columns > Quality Score. 

Ad Rank* (Important)

Ad Rank is a value used by Google Ads to determine the position of your PPC ad in the search results. It also determines whether your ad is eligible to show up at all. Ad Rank determines your actual CPC, thus it’s important to understand how it works. 

Ad Rank looks into factors such as maximum bid, quality score, ad format & extensions, and ad rank thresholds (device type, ad quality, user location and search intent). 

Ad Rank calculation = Quality Score x Maximum Bid (the most you are willing to pay for a click)

The ad with the highest ad rank score gets shown. 

Let’s understand how ad rank affects your budget with the help of an example: 

Advertiser	Max CPC (Bid)	QS	Ad Rank
You	$4	5	20
Competitor A	$6	3	18
Competitor B	$2.50	4	10

Google uses a second price auction system which means you pay just enough to beat your next highest ad rank, not your max CPC. 

So in this example, the next highest ad rank is 18. Google will charge you enough to beat 18 i.e. $2.30, even if your max CPC is $4. Essentially, if you have a better ad rank you will have better ad positioning at a lower price. 

To recap, if you have a higher ad rank you pay less because of your quality score. You stretch your budget further, even if other competitors have a greater max CPC than yours. 

Bidding Strategy

We have mentioned the concept of bidding several times in this blog. But how does one determine a high converting bidding strategy? 

Google offers various bidding strategies, the two main ones are manual and automated bidding. 

A manual bidding method allows users to set their own maximum CPC for their ads. This type of method gives you more control over your max CPC. 

Then you have enhanced CPC (ECPC), which is a mix of manual and automatic bidding methods. You start out manual CPC bids, but Google can adjust them up or down based on how likely a click is to convert. (Note: As of 31st March 2024, ECPC is no longer available for Search and Display Campaigns. It may still be available for legacy accounts if they have used it in the past). 

An automated bidding method means Google ads sets the maximum bid for you based on the likelihood of clicks or conversions. 

Under this method, a popular feature known as Smart Bidding is widely used by advertisers. Smart Bidding uses AI to leverage auction time signals and auction time bidding to set a bid for every query. It optimizes for conversions or conversion value in every single auction. You can select your goal when using smart bidding, for example, select target ROAs (tROAS) to optimize your return on ad spend. 

The type of bidding method determines how your budget is spent. Manual or ECPC is recommended for beginners or small budgets or when testing. Automated or smart bidding is best for scaling or if you trust Google to optimize your campaigns. 

Campaign Type 

The type of ad campaign you choose to run will also affect the way your budget is spent. 

Ad campaigns have different intents and goals. 

Search campaigns usually have higher purchase intentions because customers are actively searching for something they want. This means your budget could get used up faster. Since you can target purchase intent keywords with higher chance of conversions, your budget is used effectively. Also, you are only charged when someone clicks on your ad. 

Display campaigns are better suited for brand awareness and retargeting. The CPC is typically lower, but the purchase intent is lower. 

Google Shopping Ads are suited for e-commerce brands. The CPC ranges medium to high depending on your product category. The purchase intent is typically higher for shopping campaigns. 

For Youtube Ads, the CPC or CPV (Cost Per View) is low most of the time. It is best suited for brand awareness. 

Performance Max campaigns have varied CPC’s because it is blended across all networks. Your CPC will fluctuate depending on where the clicks are coming from. 

Pro Tip: Use a shared budget if you are running multiple ad campaigns. This will distribute your across campaigns allowing underutilized budgets to be automatically reallocated to budget capped campaigns (budget capped means campaigns that have exhausted their budget).

Objectives

When you set up your Google Ads campaign, you are prompted to select an objective. This is an important step as it informs the algorithm about the goals you want to achieve.

Selecting the objective does impact the way your budget will be spent. Different campaign types have different objectives available. 

Let’s see how your budget is used for different objectives: 

Say you are running a search ad campaign, and you select the sales or leads objective. Your budget will be used more aggressively to find people more likely to convert. The CPC might also be higher, however, the clicks are considered more valuable. (Pro Tip: Ensure you set up conversion tracking to see how leads are behaving after interacting with your ads.)

Another example: You are running Google Shopping Ads and your objective is to drive website traffic. Your budget will focus on attracting as many clicks as possible. And yes, this means your CPC would increase. 

Keywords Chosen 

The type of keywords chosen for your Google Ads (eg, branded, long tail, broad, competitor, informational, etc) also has an impact on the spending of your budget. 

High intent keywords are bottom of the funnel keywords that indicate a readiness to purchase–these keywords attract higher CPC for obvious reasons. For example, a high intent keyword would be “buy running shoes online” or “hire a wedding photographer in Austin”. While the CPC may be higher, it works in your favor as these keywords have a good conversion rate. 

Informational keywords such as “best skincare routine” or “how to choose a DSLR” have a low purchase intent and thus a low CPC. Target these keywords if your goal is to drive brand awareness. You can also use the leads gathered from these ads—along with data captured through a retargeting pixel—to run highly effective retargeting ads.

Other keywords include: 

• Long tail keywords – Here’s an example of a long tail keyword “best running shoes for flat feet under $30”. These keywords have a low volume, competition and CPC but are highly targeted. Best suited for niche markets. 
• Broad keywords – Broad keywords blanket a niche, for example, “shoes” “marketing” or “power banks”. The CPC tends to run higher, exhausting your budget fast. Best suited for large budgets and brand discovery. 
• Competitor keywords – These types of keywords target the keywords your competitors are targeting or have your competitors brand name, some examples include, “Shopify alternatives”, “SEO agency”, or “flower delivery”. These have a high CPC, and require a strategic approach. 
• Branded keywords – Branded keywords are keywords that include your brand name. They have a low CPC because the competition is low. 

Note: Google does not allow advertisers to use trademarked names in their ad copies unless they are authorized. For example, if you are an Apple authorized reseller then you may be permitted to use their name in your ad copy.

Auction Time Quality

In the Google Search ad auction, Google Ads evaluates the ad relevance, keywords, expected CTR, ad quality, device, location, time of day, audience signals, and landing page experience in real time. This determines how and where your ads will appear on the search results. If your auction time quality is deemed good, you will have a lower CPC because of the auction time quality–the opposite is also true. 

So how is this different from Quality Score? Quality Score is based on historical performance, and gives you a general reputation of the quality of your ads. It is often used for optimization purposes. Auction time quality happens behind the scenes and in real time as users perform searches. 

Yes, a higher Quality Score will definitely help you win the auction. If you remember, Quality Score looks at several of the factors auction time quality looks at too. 

How Does Google Ads determine your cost per click?

By now you understand that CPC plays a big role in how your budget is spent for your Google Ads campaign. There are various factors that affect your CPC, as we have discussed above. 

The question however still remains, how does Google Ads determine your CPC i.e. what your CPC will be as an individual advertiser. Your CPC is not simply the amount you bid, it is determined by several other key factors that work together in real time. 

Google Ads mainly looks at the following factors to determine your real time CPC: 

• Quality Score – A high QS means low CPC, and a low QS means high CPC. 

• Your maximum CPC – This is the maximum amount you are willing to pay for a click. Setting your max CPC has to be strategic. A good strategy is to bid enough to be competitive while not overspending on each click. (Learn the difference between Average CPC and Max CPC)

• Ad rank – Ad rank heavily influences your CPC. If you have a high ad rank it means you pay less to maintain your position. But if your ad rank is low, then you might end up in a lower position or not show at all. Focus on optimizing your Quality Score, adjusting your bids and leveraging Google Ads extensions. 

• Ad competition – The lower the competition the lesser you pay i.e. low CPC. However, Google has ad rank thresholds i.e. even if you have no competitors you won’t get a click for free. 

In a nutshell, all of these factors come together to determine your CPC. You have to keep monitoring and optimizing your Google Ads campaigns. [Jump to Google Ads budget report and auction insights]

How CPC Affects Your Budget?

Now for the burning question, how does your CPC actually affect your budget? 

As we have mentioned several times, it affects how your budget is spent. It influences the amount you pay for each click on your ad, which directly impacts your total advertising spend and your return on ad spend (ROAS). 

A low CPC means your budget goes a long way, allowing you to get more clicks and potential conversions at a decreased price.

A high CPC means your budget gets exhausted faster, however, in some cases it can mean you get high purchase intent leads. In other cases, it can be a negative thing especially when your Quality Score is low. It would mean wasting your ad spend, low conversions and not attracting the right type of leads. Additionally, keep an eye out for Invalid Clicks in Google Ads, which can skew your campaign performance and unnecessarily drain your budget.

Pro Tip: Always track CPC with conversion data. For this you have to successfully set up conversion tracking. Here is an example of why tracking conversion data can be beneficial:  CPC: $10 Clicks: 100 Total Ad Spend: 100 × $10 = $1,000 Conversions: 10 sales CPA (Cost per Acquisition): $1,000 ÷ 10 = $100 Revenue: 10 × $500 = $5,000 ROAS (Return on Ad Spend): $5,000 ÷ $1,000 = 5× (or 500%)

Google Ads Budget Calculators & Tools

If you are just starting off your Google Ads journey, it is natural to be confused and overwhelmed with information concerning the budget. Luckily, Google Ads provides a budget calculator tool that gives you an estimated budget range per day. 

Google Ads Budget Planner 

Let’s see how to use the Google Ads Budget calculator: 

Step 1: Access this webpage

Step 2: Choose your business vertical i.e. the category of your business

Step 3: Enter your city or state and click on ‘Estimate Budget’

Step 4: Et voila! You will see an estimated budget range per day. It also shares some statistics about how much your competitors are spending in your selected city or state.

Google Ads Performance Planner 

Source: Seroundtable

Google Ads also offers a tool known as ‘performance planner’. The Google Ads performance planner essentially allows you to forecast the performance of your campaigns and plan your budgets. It uses machine learning to simulate how changes in the budget or campaigns settings might affect conversions, CPA, conversion value, clicks, etc. 

Now it’s important to mention here that in order to use the performance planner your campaigns should have historical data of at least 7+ days. You can run a test campaign and use the performance planner to gain a better understanding of the performance of your campaign.  

Google Ads also offers a bid stimulator for manual CPC and smart bidding. The simulators help you see how different bidding amounts might change your ads’ weekly performance.

Third-Party Tools For Budget Estimation

Besides Google Ads’ budget estimation tools, there are also third party tools that help in estimating your Google Ads budget. 

• ConvoBoss’ free tool
• DashThis’ free tool
• KeywordWrapper Tool
• Digital Position’s free tool
• SEMRush 
• Ahrefs
• SpyFu
• WordStream
• Opteo

How to Determine Your Ideal Google Ads Budget?

Understanding How To Choose a Budget & Bid

We have already discussed what an average daily budget is. To recap, an average daily budget is the amount of money you are willing to spend daily on each ad campaign. It tells Google how much you are comfortable spending each day over the course of the month. 

A bid is the amount you are willing to pay for each click, conversion, view or impression (depending on your bidding strategy). 

Both your bid and budget should be based on what you want to achieve. Remember that when setting a bid you are asked what you want to focus on. 

Smart bidding has the following options: Maximize conversions, target cost-per-action, target return on ad spend, maximize conversion value, maximize clicks, viewable CPM (cost per thousand impressions), target impression share, and maximize CPV (cost per view). 

Manual bidding has the following options: manual CPC and enhanced CPC. With manual bidding you can decide how much you are willing to pay for each click. 

Thus, it is important to know what your goal is before you set a budget or a bid. 

Let’s explore this through an example:  You run an online store and want sales.

• Start with $20/day (your average daily budget)
  
• Use Maximize Conversions (Smart Bidding)
  
• After collecting 50 conversions, switch to Target CPA (cost per action) of $10 if that’s your profit margin. Target CPA will help you get as many conversions as possible at $10, using machine learning to optimize your bids in real time.
• Google will only bid where it thinks it can get $10 sales.

Starting with a Test Budget

To figure out the best Google Ads budget, you have to test and advertise. What works for one advertiser, might not necessarily work for another. 

Start out with a test budget of $10 to $15 per day. Your monthly budget will then be around $300 to $450 approximately. Run an ad campaign for a minimum of 2 weeks. This gives you enough data to understand what keywords work for you, identifying negative keywords, audience signals, CTR, ad copy performance, etc. 

Use Google Ads budget report and Auction Insights to deep dive into the performance of your campaigns. 

A Google Ads budget report reveals how much you are projected to pay at the end of the month. It shows your campaigns actual spending compared to your daily average budget. For example, it can reveal if your budget is under spent or if your budget is fully exhausted. 

Auction insights reveal your ad performance vs your competitors (other advertisers competing for the same keywords). For example, it can show you if you are losing impression share to your competitors. Impression shares is the percentage of impressions your ad actually receives to the total number it could have potentially received. In such cases, you should increase your budget and bids. 

Beyond these two reports also check your Quality Score, ad rank, conversions & CPA, impression share, CTR, search terms report (especially beneficial for identifying negative keywords), conversion rate, and device & location performance. 

Tweak your budget accordingly and optimize your campaigns. Conduct a Google Ads audit periodically as well to optimize your campaigns and budget.

Other Google Ads reports to refer to: Search terms report, placement report, geographic report, and ad preview & diagnostic tool.

Setting Your Budget Based on Goals

As we previously discussed, your budget is heavily dependent on the goals you set. Your budget is not just a number, it is a direct reflection of what you want to achieve with your Google Ads campaign. 

When running your Google Ads campaigns, your budget should reflect the primary marketing objective. Google Ads offers different bidding strategies and budget recommendations based on the goal you select during the initial campaign set up. This ensures your ad spend is used effectively to deliver the results that matter the most to your business. 

If you want to generate leads then your goal would be Target cost per action. This means you have to know how much you are willing to pay per conversion. Your average daily budget determines how many conversions you can afford based on your Target CPA.

If you are looking for e-commerce sales then your goal would be Target ROAS and budget allocation. You need to calculate how much you’re willing to invest to reach a specific revenue goal.

If you want to raise brand awareness then your goal would be impression based budgeting. Decide how many people you want to reach, and how often.

Calculating Budget Based on CPC & Conversion Rates

To calculate your budget based on CPC and conversion rates (CVR), here’s how to do it: 

(Conversions ÷ Clicks) × 100 = Your CVR 

CPC ÷ Conversion Rate = Estimated CPA 

Daily Budget = Estimated CPA × Target Conversions per Day

• CPC = $2
  
• Conversion Rate = 5%
  
• Estimated CPA = $2 ÷ 0.05 = $40
  

If you want 5 conversions per day, your budget should be:

$40 × 5 = $200/day

To use this formula you can either run a test campaign of 14 days, or use your industry average. 

Pro Tip: Always adjust budgets for seasonality and trends.

How Much Should I Spend on Google Ads Per Month?

Google Ads price per month varies based on your goals and marketing budget. If you are a small business start with $456 to $608 ($15 to $20 per day), a medium sized business then start with $1520 to $2128 ($50 to $70 per day) and if you are a large business then start with $4864 to $10,336 ($160 to $340 per day). 

Always test, optimize and then aim to scale your budget. 

Is $500 enough for Google Ads?

Yes, $500 is an excellent starting budget for testing, learning, and gathering performance data that will help you understand what works for you and what doesn’t. 

$500 per month averages to around $16.44 per day. However you can run a test campaign for 2 weeks, and your average daily budget would then be $35. This would be more effective use of the budget to gather good data for optimization. 

How Much Should I Spend on Google Ads Per Day?

Depending on your business size here is what we recommend as your Google Ads budget per day: 

Small scale business – $15 to $20 per day 

Medium sized business – $50 to $70 per day

Large scale business – $160 to $340 per day

Is $5 a day good for Google Ads? 

Yes, but such a small scale budget should be used as a test budget or learning. It is not ideal for scaling conversions, leads or sales. Even if your goal is brand awareness, $5 is less. 

An average daily budget of $5 means your average monthly budget would be $152. 

How Much Do Other Businesses Spend on Google Ads? 

It is difficult to give a precise average about Google Ads spend as it varies from business to business. 

We will look at case studies of a few businesses to give you a general idea of how much businesses are spending on their Google Ads budget. 

The formula used to calculate the budget is: Revenue / ROAS = Budget. The ROAS was mentioned in the source links of the case studies. 

• Austra 

Austra is a health and wellness brand that wants to raise brand awareness, increase conversion rates and maximize ROAS. After running Google Ads there were able to increase website visits from zero visits to 300k clicks in 2022. 

Their estimated budget (based on the revenue they generated) was around $10,638/month. 

• Away Travel 

Away Travel is a luggage brand and was a new player in the market. Naturally, they want to raise brand awareness for their products. They targeted ‘unbranded searches’ i.e. users looking for products or services but with no specified brand in their search query. 

They received $35,000 worth of clicks from 70% from search ads. Their estimated budget is  $35,000/month with about $15,000 dedicated to other campaign types or goals. 

• Royce Chocolate 

Royce Chocolate is a food and beverage ecommerce company. While Royce Chocolate already had brand awareness (mainly in Japan), they wanted to expand the awareness and increase online sales. 

By running Google Ads, they earned a revenue of $13,686. Based on this, we can estimate their budget to be $6044/per month (assuming the campaign ran for a month only). 

• Cabinet & Sink 

Cabinet & Sink is a large scale ecommerce store. They were already running Google Ads campaigns–investing $50,000 to $60,000 per month and they were barely breaking even (they were generating $160,000 in revenue per month from Google Ads). After making significant changes to their campaigns they saw a huge increase in their ROAS. 

And yes, this meant increasing their initial investments too. They invested around $120,968/per month and saw a revenue of $450,000. 

From these examples you can gauge how much other businesses spend on their Google Ads. 

Common Budgeting Mistakes to Avoid

Once you have a rough idea of the budget you will set for your Google Ads campaigns, try to avoid these common budgeting mistakes. 

• Setting a budget too low to see results – Avoid setting a very low budget because this will prevent your campaign from collecting enough data to optimize or generate meaningful conversions. 

• Ignoring daily budget overspend – As we previously mentioned in an earlier part of this blog, Google will overspend your daily budget by 2x. This is a common occurrence. If you don’t remember this then you may misinterpret the data as Google overspending your daily budget. Remember, your average monthly budget will never exceed. How much is spent per day may vary, but the total will be the same as the average daily budget x 30.4. 

• Not adjusting budgets based on performance data – If a campaign is doing well, then increase the budget. If it is doing badly, allocate the budget to another campaign to avoid wasted ad spend. 

• Targeting broad keywords – Broad match keywords often bring in irrelevant traffic wasting your ad spend. Ensure you are conducting proper keyword research for your Google Ads campaigns. 

• Neglecting negative keywords – Access your search terms report to find which keywords are triggering your ads. Analyze irrelevant keywords and use them as negative keywords. 

• Improper location targeting – Avoid targeting too wide of a geographical area or the wrong region can once again waste your ad spend. Access your geographic report to see where your ads are appearing and optimize accordingly. 

• No conversion tracking – Without conversion tracking you will not be able to measure your ROI. Set up conversion tracking to understand how leads interact with your ads. 

• Not using ad extensions – By using ad extensions advertisers have noted a 10% to 15% increase in CTR. Ad extensions are extra pieces of information that display on your ads. They include reviews, a call button with your phone number, location, structured snippets, etc. 

• Using incorrect bidding strategies – Each bidding strategy has a specific goal. Understand what the bidding strategy actually yields before selecting one. 

• Poor ad copy and landing page alignment – Your Google Ads copy should match your landing page. If your ad copy offers something specific, then your landing page should follow. 

• Ignoring Quality Score – A low Quality Score raises your CPC and lowers your ad rank, making your budget less efficient.
  

Tips to Optimize Your Google Ads Budget 

Adjusting bids by device, location, and audience, dayparting

By optimizing your bids based on device, location, audience and dayparting you can rake in better ROI. 

• Boost bids for high converting devices (mobile or desktop), and lower them if you notice the performance is weak. To check performance by devices: Go to your campaign > Click on “Devices” in the left-hand menu > you’ll see performance broken down by Computer, Mobile, Tablet > review CPC, CTR, conversions, and CPA > use bid adjustments. 

• Focus ad spending on top performing locations by checking your geographic report. To check geographic report: Click into your campaign > on the left menu, click “Locations” > choose “Geographic report” for actual user locations > analyze metrics like clicks, conversions, CPA, and ROAS > Adjust location targeting or bid modifiers accordingly.

• Increase bids for remarketing lists or custom segments that have a good conversion rate. To check performance by audience: Select your campaign or ad group > click on “Audiences” in the left menu > view performance under “Observation” or “Targeting” > review metrics for each audience group (e.g., Returning Visitors vs. New Users).
• Lastly, use ad scheduling to run ads during peak hours or days. To check which days or hours your ads are performing the best: Go to your campaign > click on “Ad schedule” in the left-hand menu > select “Day & Hour” tabs at the top > analyze performance by hour of day and day of week and use ad scheduling to turn off ads during low-performing hours or boost during peak times.

Testing different ad creatives for better ROI

A/B test different headlines, ad copies, visuals, assets, extensions, descriptions and CTAs to avoid ad fatigue. Use the ‘experiments’ feature on Google Ads for this. 

Monitoring Google Ads price per month trends

Certain seasons will yield more conversions than others. The holiday season for example is a peak time for shoppers to buy products. Use Performance Planner to forecast upcoming changes and adjust your budget accordingly. 

Conclusion

How much you should spend on your Google Ads budget is largely dependent on various factors such as industry CPC, quality score, goals, targeted keywords, campaign type, etc. 

Keeping these in mind and remember to always start out with a test budget and then optimize your Google Ads campaigns. This will help you maximize your conversions and ROI. 

FAQs

Can you run Google Ads on a tight budget?

Yes you absolutely can. The key is to be strategic about it. If you have already run test ads and have enough data to know where your profitability lies then go ahead. If not, it is recommended you run test ads first to understand how much you should invest in your Google Ads budget. 

What are the most expensive keywords in Google Ads?

According to our research the most expensive keywords in Google Ads are: searches with phrases “near me”, any phrases with the words “attorney”, “lawyer”, “loans”, “mortage”, “insurance”, “credit”, “donate”, “classes”, “rehab”, “degree”, all have a high CPC. 

What is a good budget for Google Ads? 

Start out with a test budget of $10 to $15 per day and tweak your budget accordingly. If you are a small business start with $608 ($20 per day), a medium sized business then start with $2006 ($66 per day) and if you are a large business then start with $5046 to $10,123 ($166 to $333 per day). 

How much money should I put in Google Ads?

There is no one size fits all solution to this question. Start with a test budget of $10 to $15 a day, and then optimize it accordingly as per the performance of your campaigns. 

Why did Google Ads go over my daily budget?

This is known as overdelivery and is a common occurrence and not a cause for concern. Google Ads will never exceed your 30.4x your monthly budget.

How do I stop Google Ads from overspending?

Google will never overspend your average monthly budget. It can overspend your daily average budget based on days that could yield higher conversions. You can’t stop Google from overspending your average daily budget because it is built into their system to optimize performance. The good news is that your daily monthly budget will never exceed your daily budget x 30.4.

How much should I budget for Google Ads per day?

Start with $10 to $15 per day as a test budget. If you are a larger business then start with $50 to $100+ per day. 

Check Out These Related Articles:

• How to Run Google Ads