How Much Does Google Advertising Cost in 2023?

Google has been a leader in digital marketing for over 20 years. However, the landscape is always changing and it’s important to stay up-to-date on how much Google advertising costs and how it's changing over time.

In 2023, Google ad costs remain flexible and can fit a range of budgets, making it a viable option for businesses both large and small. However, specific costs can vary significantly depending on the type of ad you choose.

Google ads are generally priced based on a cost-per-click (CPC) model. This means that you pay for each click your ad receives, rather than paying a set price for the time spent running an ad.

The amount of money you’ll spend depends on a number of factors, such as search volume, competition, sales goals and the size of the area you're targeting.

In general, you can spend as little as $1 per click or up to hundreds of dollars for each click, depending on the industry and the type of ad you choose.

But generally speaking, the average cost per click in Google ads in 2023 is around $4.22. This is much higher than the $2.96 per click average in 2022. The reason for this is the increase in competition, which has driven up prices across all industries.

With that in mind, let's look at how Google ads work, the different types and how much they cost.

How Google Advertising Works

At the heart of Google Advertising is something called Pay-Per-Click (PPC) advertising. This means that you only pay when someone clicks on your ad. You're not shelling out money just to have your ad sit there; you're paying for actual results.

The first step in the journey is choosing the right keywords. These are the words or phrases that people type into Google when they're searching for something.

Let's say you sell homemade candles. You might choose keywords like "handmade candles," "scented candles," or "soy wax candles."

Once you've chosen your keywords, you enter into an auction with other businesses who've also selected those keywords. You decide how much you're willing to pay each time someone clicks on your ad. This is your bid.

But here's the thing: it's not just about who bids the most. Google also looks at something called your Quality Score, which is based on the relevancy of your ad, your landing page (where people go when they click on your ad), and your overall ad performance.

If your Quality Score is high, you might still win the auction even if you bid less than someone else. If you win the auction, your ad will show up when people search for your chosen keywords. But remember, you only pay when someone actually clicks on your ad.

The best part about Google Advertising is that you can reach people at the exact moment when they're looking for what you offer. It's not just shouting into the void; it's putting your message in front of the right people at the right time.

Types of Google Ads

There are different types of Google Ads, but we're just going to look at some of the most common. And these include:

Search Ads

These are the ads you typically see at the top of the Google search results page. They look like regular search results but have an "Ad" label next to them. When you type a search query, Google shows ads related to that query.

The cost of Search Ads depends on the bidding competition for keywords. This can vary greatly, ranging from a few cents to tens of dollars per click, depending on the industry and keyword competitiveness.

Industries with a high lifetime customer value and high competition, like legal services, insurance, and financial sectors, often pay more because the potential ROI from these ads can be substantial. 

On the other hand, industries like arts and crafts or educational resources may pay less because the keywords are less competitive.

Display Ads

Display Ads appear on websites that are part of Google's Display Network. These ads can be text-based, but they're often visual and come in various sizes.

Display Ads are great for building brand awareness and re-engaging users who have already visited your website, a technique called retargeting.

These Ads typically cost less than Search Ads because they are usually based on Cost per Thousand Impressions (CPM), meaning you pay a certain amount for every 1,000 times your ad is shown, regardless of how many clicks it gets. Again, costs can vary widely but expect to pay anywhere from a few cents to a few dollars per thousand impressions.

Industries that rely heavily on visuals, like fashion, design, or travel, may get more value from these types of ads. Highly competitive industries can also benefit from Display Ads' lower costs for brand visibility.

Shopping Ads

These are the ads that appear above the search results when you search for a product. They show a product image, price, and merchant name. These ads are great for retailers and drive traffic directly to product pages.

The cost of Shopping Ads is similar to Search Ads - it's based on a bidding system for product keywords. However, because these ads often lead directly to sales, the pricing can be higher and depend on the industry.

Retail industries with high-value items like electronics, furniture, or luxury goods might pay more for Shopping Ads. Lower-value or niche product industries might pay less.

Video Ads

These ads appear on YouTube and across Google's partner sites. They can be standalone videos or inserted within other streaming video content, and they can be skippable or non-skippable.

The pricing for Video Ads varies. It can be charged based on a CPM model or a Cost-Per-View (CPV) model, where you're charged when a viewer watches 30 seconds of your video (or the entirety of it if it's less than 30 seconds) or engages in some way with your video.

Industries that can leverage strong storytelling or product demonstrations, like the entertainment industry or innovative tech gadgets, might invest more in Video Ads.

Factors That Influence Google Ads Pricing

The cost of Google Ads is determined by a number of factors, which include:

Bidding Strategy

Think of this as an auction, where you're bidding against other businesses for that top ad spot. Google gives you a few different strategies to choose from.

You could go for a Cost-Per-Click (CPC) bid, where you only pay when someone clicks your ad, or a Cost-Per-Impression (CPM) bid, where you pay for every thousand times your ad is shown.

The strategy you pick can really affect your ad cost. For example, a popular keyword might have a high CPC because lots of businesses are bidding on it.

Quality Score

This is Google's way of judging how relevant and useful your ad is to the user based on your ad's click-through rate, relevance, format, and landing page quality. Think of it as a report card for your ad.

The better your Quality Score, the less you might have to pay for a click or impression. That's because Google rewards you for creating good, relevant ads.

Competition and Industry

Certain industries are naturally more competitive in the online space because of the potential return on investment. For instance, businesses in the insurance, legal, and home repair sectors often face stiffer competition for ad space.

That's because the value of a single click can potentially be worth hundreds or even thousands of dollars for these businesses due to high customer lifetime value. This high competition can drive up the bid prices for keywords related to these industries, making the cost-per-click more expensive.

So if you're in a high-competition industry, you might see yourself paying more for your Google Ads compared to a business in a less competitive industry.

Geographic Location and Targeting

If you're aiming to target high-income areas or large cities, you might find the costs are higher. That's because there's likely more competition, and the potential for a higher return is greater.

On the other hand, targeting less populated areas or lower-income regions might be cheaper, but the potential for clicks might also be less.

Keywords

These are the terms or phrases you bid on, hoping that when someone types them into Google, your ad will appear. Popular keywords are often more expensive because many businesses are bidding on them. But less common keywords can be cheaper.

Finding the right balance of keyword popularity and competition can really help control your ad costs.

Strategies to Optimize Google Advertising Costs in 2023

There are several strategies you can use to optimize your Google advertising costs. These include:

Become the Master of Your Bidding Strategy

Just like a chess game, your move with your bidding strategy can make all the difference. Manual bidding lets you have control over your bid amounts, so you can adjust based on the performance of different keywords.

However, if you're new to the game or short on time, Google's automated bidding strategies can be your best friend. They use machine learning to optimize your bids for each auction.

You need to test and experiment to find the strategy that suits you best.

Enhance Your Quality Score

Google rewards relevant, high-quality ads with a better Quality Score, and this can lead to lower costs and better ad positions.

So, how can you up your game here? Focus on the relevance of your ads to your keywords, ensure your landing page is top-notch, and strive to improve your ad's click-through rate.

Play Smart with Keywords

Google advertising involves a strategic approach to choosing the right keywords for your ad campaigns. The goal is to find less competitive, niche keywords, often known as long-tail keywords, that are highly relevant to your product or service.

These keywords often have lower costs and can attract more qualified leads. It's about understanding your customer's search habits, utilizing keyword research tools, and continuously refining your keyword strategy.

This approach can help you strike the right balance between reaching a good chunk of people, managing your costs, and zeroing in on potential customers.

With the right keyword strategy, you can optimize your ad performance and get the most out of your advertising budget.

Target Wisely

Think about who your product or service really appeals to and where they are located. If you're a local business, narrow down your targeting to your specific area.

If you're an e-commerce business, maybe there are specific areas where you see more sales. Use location targeting to your advantage, and you could see costs drop and relevance increase.

Schedule Your Ads

Google Ads lets you schedule your ads to run on specific days and times. If you notice that your target audience is more likely to convert at certain times or on certain days, why not schedule your ads only to run then?

This can reduce wasted spend on clicks that are less likely to convert and can help stretch your budget further.

Monitor Ad Placement

The placement of your ads can significantly influence their performance and, consequently, your costs. This applies to both Display Network placements and search rankings on the Search Network.

For Display campaigns, regularly review where your ads are being placed and exclude low-performing or irrelevant sites. On the Search Network, aim for a balance between top-ranking positions and cost-effectiveness.

Don't Forget Negative Keywords

Negative keywords allow you to filter out irrelevant search terms from your campaigns, allowing you to concentrate solely on those keywords that are significant and relevant to your customers.

Regularly updating your negative keyword list can help prevent wasted spend on irrelevant clicks and keep your ads laser-focused on qualified leads.

Test Different Ad Formats

Not all ad formats may work equally well for your business. Perhaps Search Ads are more effective, or maybe your audience responds better to Display Ads or YouTube Ads.

Experiment with different formats, analyze their performance, and adapt your strategy accordingly.

Predicting Changes in Google Advertising Costs

The world of Google Advertising is always shifting, but based on current data and industry insights, we can make a few educated guesses about where things might be headed. Remember, these are just predictions and not set in stone.

A recent report by WordStream found that the average cost per click (CPC) has been steadily rising. They also found that cost per conversion (CPA), or what it costs to get an ad clicked on and lead to a conversion, has declined in some industries and risen in others.

One thing we've been noticing is that as more businesses move online, competition for keywords is heating up, and this could potentially drive up costs.

We're also seeing new industries emerge and existing ones evolve, which could lead to changes in the costs associated with different sectors.

Technology advances and changes in Google's algorithms may also lead to fluctuations in costs.

While it's difficult to say what the cost of a click will be in the future, there are some trends that could help us predict what we can expect.

Impacts of These Trends on Businesses

So, what does this all mean for your business?

Well, if costs do rise, it could mean you'll need to dig a bit deeper into your pockets to keep your ads visible. However, keep in mind that this depends on the industry you're in.

In 2023, some industries have seen an increase in the cost of clicks by as much as 17%. For example, the cost of a click on a real estate ad has gone up, while the cost of a click on an insurance ad has gone down.

This means that different industries will be affected differently by these trends. While some businesses may have to pay more for their ads, others could see a decrease in the cost of their ads.

How Businesses Can Prepare

Change is part of the game in digital advertising, but there are ways to brace for it. Stay informed about industry trends and changes to Google's platform.

Make use of Google's tools and analytics to monitor your campaigns and adjust your strategies as needed. Play around with different types of ads and keywords to see what gives you the best return. Remember, flexibility and adaptability are your allies in this ever-changing arena.

And most importantly, don't lose sight of what's really important - connecting with your customers. Costs and algorithms may change, but the value of building strong relationships with your customers is timeless.

Final Thoughts

The cost of Google Advertising in 2023 continues to be a dynamic aspect of digital marketing, influenced by various factors such as bidding strategy, Quality Score, competition, industry, and geographic location. It's clear that effective Google Advertising isn't simply a 'set and forget' process.

It requires a hands-on approach, involving regular review and adjustments to campaigns based on performance metrics. Understanding the evolving landscape, keeping abreast of Google's policies and algorithms, and testing and refining your strategies are all vital components to optimizing your Google Advertising investment.

Despite the challenges, Google Advertising remains a powerful tool for businesses to connect with customers, drive conversions, and achieve growth in the digital age.