Google Ads (formerly Google Adwords) has become an indispensable tool for businesses looking to generate more leads and sales. But for many small and medium business owners, one burning question remains: “How much is this going to cost me?”

In this comprehensive guide, we’ll demystify Google Ads pricing. We’ll explore both the obvious expenses and the hidden factors that influence your ad spend, providing you with the knowledge you need to make informed decisions about your digital marketing strategy.

Key Takeaways

• Google Ads in South Africa operates on a pay-per-click model, with an average cost of around R9 per click in 2024.
• Costs vary based on factors like industry, competition, seasonality, and ad quality score.
• Management costs are additional if you hire an agency, which can charge in different ways (all-in-one fee, percentage of ad spend, or flat rate).
• A recommended starting budget is at least R5,000 per month per campaign.
• Effective cost management strategies include setting clear goals, using appropriate bidding strategies, regular optimisation, and accurate reporting.
• Tips to maximise results include implementing conversion tracking, targeting long-tail keywords, building a strong negative keyword list, and using individual landing pages.
• The final spend often comes down to what a business can afford, despite the complex pricing factors involved.

Understanding Google Ads Costs

Broadly speaking, there are two costs involved when running Google Ads::

1. The costs incurred from the ads themselves
2. The fees you may need to pay someone to manage these ads.

If you choose to manage your Google Ads in-house, you will save on the latter cost. Although, technically speaking you could also give yourself a tattoo – but are you really the best person for that job?

Let’s start by discussing the costs of the Google Ads themselves.

1. Google Ads Cost

Google Ads is an advertising platform that allows you to show adverts to people searching for certain keywords on Google.

It doesn’t cost anything to set up an account or run adverts; Google charges for its ads on a “Cost Per Click” (CPC) basis, meaning you pay each time someone clicks on your ad.

Pretty straightforward.

The average CPC for Google Ads in South Africa according to Statista is around R9. This is probably a safe benchmark to work with if you are doing the sums in your head.

However, it’s important to understand that your CPC will vary significantly depending on external factors such as industry and competition levels. For example, you’ll find that more competitive industries, like legal services or insurance, often face higher CPCs due to intense competition for key search terms.

Let’s get into the factors affecting Google Ads cost per click.

Factors Affecting Google Ads Cost

• Industry: Google is smart (who knew?), so it will charge more for clicks in industries where there is a very high conversion rate, or where the value of services is high. To give you an example, some of our painting clients will pay upwards of R100 a click, because the value of a sale can be substantial.
• Seasonality: External economic, social and political events can also affect the cost of Google Ads. CPCs tend to skyrocket over Black Friday due to the increased online activity.
• Competition: This is probably one of the main factors affecting how much Google Ads costs, because as more advertisers enter the market, the demand for popular keywords increases, pushing up the prices.
• Quality Score: This is the rating given to each keyword in your account based on how relevant it is to what you are advertising. Google wants to ensure that it is serving the most relevant ads to its users, and therefore rewards advertisers who do that.

2. Management Cost

Ok, let’s assume you have come to your senses and decided to hire an agency to manage your Google Ads. On the upside, you will probably get better results… the downside is that you have to pay for that.

And if Google Ads wasn’t complicated enough, agencies like to charge for their services in different ways:

• The “All-in-one” Fee: This is where they will invoice you for their fee and the advertising spend together. The problem is that you aren’t guaranteed how much of that fee will actually end up as advertising spend. We do not recommend this method of billing at all.
• The “Percentage of Ad Spend” fee: This is where they charge a percentage of your total Google Ads spend. For example, if your advertising spend was roughly R50,000 and the agency’s fee was 15%, they would invoice you R7500 to manage your account. This is the most popular way agencies like to charge for Google Ads because the more a client spends the more work there will inevitably be.
• The “Flat rate” fee: This is where they charge a fixed monthly fee for their services, regardless of the ad spend. This is probably the least common, but some agencies still do it.

One thing is for certain, there is no “standard” Google Ads management fee – so the cost will vary widely from agency to agency.

Factors Affecting Management Cost

• Agency Size and Expertise:  You’ll find that larger agencies often charge more due to their broader service offerings and higher overhead costs. However, their depth of experience can lead to more effective Google Ads campaigns. On the other hand, smaller agencies might offer lower fees, but they might not have the expertise or experience to get you results.

The temptation is to spend less on management and more on advertising – but you know what they say about paying peanuts.

What Is a Good Starting Budget For Google Ads?

At this stage, you’re probably ready to dive into Google Ads, but you aren’t sure where to start when it comes to budget. Here’s a guide to help you get started.

There Are No Limits

There isn’t a straightforward answer to the question of how much to spend on Google Ads. The reality is that you can spend as much or as little as you want—there is no minimum or maximum.

TIP: The more you spend, the faster you will see results. Conversely, spending less will lead to slower results.

Keyword Research

To begin, find the average CPC within your sector. Tools like Google Keyword Planner can help you pinpoint these costs accurately. Understanding how much each click is likely to cost will help you estimate your budget more effectively.

Now it becomes a simple question of how many people you want to visit your website. For example, if you want 1,000 people to visit your site each month and the average CPC is R15, you will need to spend roughly R15,000 a month (1,000 x R15 = R15,000).

Conversion Rates

Next, consider your website’s conversion rate, which is the percentage of visitors who take a desired action (such as making a purchase, filling out a form, or calling your business). Knowing this number is crucial because it tells you how many visitors need to come to your website before you achieve a conversion.

If you don’t know your website’s conversion rate, you can use a global average. Generally, a conversion rate of 3% is considered average, while top-performing websites often achieve rates above 10%.

With a 3% conversion rate, you would need roughly 33 visitors to get one conversion (1 / 0.03 ≈ 33.33).

To take it a step further, you can calculate the expected “cost per conversion.” For example, 33 visitors at R15 per click equals R495 per lead or sale. So, if you want 10 sales a month, you would need to spend roughly R4,950 (10 x R495).

A General Rule of Thumb

If the calculations seem overwhelming, a general rule of thumb is to not spend less than R5,000 per month per campaign. This would give you a daily budget of R164.

At Launch, we use a Budget Forecasting spreadsheet to help our clients decide what they should spend and what they can potentially achieve.

Setting a starting budget for Google Ads requires a balance between your business goals, industry norms, and conversion rates. While there’s no one-size-fits-all answer, understanding these factors will help you make an informed decision and optimise your ad spend for better results.

Managing Google Ads Costs Effectively

• Setting Clear Goals: How much are you willing to pay for a click? How much for a lead? Jumping blindly into Google Ads without setting some KPIs is just setting yourself up for disappointment.
• Using the Right Bidding Strategies: Without getting too technical, there are several automated and manual bidding strategies that you can use in Google Ads. Using the right bidding strategy for your goals will ensure your ads run efficiently, with minimal waste.
• Regular Optimisation: Regular optimisation helps eliminate wasteful spending and ensures your ads remain competitive.
• A/B Testing Ad Copy: A/B testing allows you to identify the most effective adverts, leading to higher click-through rates and conversions, which can reduce costs over time.
• Utilising Ad Scheduling: Schedule your ads to run during times when your target audience is most active and likely to convert. By focusing your budget on high-performing times, you can avoid spending on low-traffic periods and improve your return on investment.
• Accurate and Regular Reporting: Accurate reporting provides insights into what’s working and what’s not, allowing you to make informed decisions and adjustments to your strategy to manage costs effectively.

4 Tips to Maximise Your Results (and Money) with Google Ads

If you are like most business owners, you probably don’t have large bags of money lying around collecting dust. So, you’ll want to get the most out of every cent you spend on Google Ads.

Here are 4 tips for improving your Google Ads performance, and ensuring that you get an ROI.

1. Implement conversion tracking

By understanding which ads lead to customer actions, you can fine-tune your campaigns to focus more on high-performing strategies.

You’ll need to create conversion actions that are tailored to your specific goals, such as purchases, sign-ups, or leads. This setup involves adding a piece of code, known as a tag, to your website. The tag fires when a user completes a desired action, recording this as a conversion.

2. Target long-tail keywords

While broad keywords often attract more general traffic, targeting long-tail keywords can significantly enhance your Google Ads results by capturing more qualified leads. These specific keyword phrases, typically three to five words long, align closely with user intent, making them crucial for a highly targeted campaign.

By focusing on long-tail keywords, you’re not just aiming for quantity but quality, reaching an audience that’s further down the purchase funnel and more likely to convert.

3. Build a strong negative keyword list

By identifying and excluding terms that aren’t relevant to your offerings, you’ll prevent your ads from appearing in unrelated searches, thereby saving your budget and improving the quality of traffic to your website.

A well-crafted negative keyword list reduces wasted spend significantly. For instance, if you’re selling luxury cars, adding negative keywords like ‘cheap,’ ‘second-hand,’ or ‘repair’ ensures your ads aren’t shown to those seeking budget options or maintenance services.

4. Use individual landing pages

To maximise your Google Ads effectiveness, tailor individual landing pages for each campaign to directly address the needs and interests of your target audience. This specificity reduces bounce rates and increases ad Quality Scores, which, in turn, can significantly lower your CPC.

Conclusion

So, you’ve waded through the labyrinth of Google Ads pricing for 2024 in South Africa, equipped with every data-driven insight imaginable.

Ironically, despite all the variables and intricate pricing strategies, your final spend might just boil down to spending what you can afford to spend.

Remember, setting a smart budget and actively managing your campaigns are key to ensuring your investment in Google Ads doesn’t just become another budgeting irony.