How Much Does Google Ads Cost?

The cost of Google Ads varies because Google uses an auction system. You need to optimize your ads to appear in ad units at the most cost-efficient rate. In Indonesia, the click costs start at 800 rupiahs on Search, 150 rupiahs on Display, and 30 rupiahs per view on Video.

However, as an advertiser, you have control over your daily ad budget and the maximum amount you are willing to pay per click. However, if you set a bid too low, for example, 100 rupiahs per click, even if the system accepts your bid, your ad is unlikely to be shown because overall, your ad is considered to have a very low ad rank. Therefore, as a Google Ads user, you need to determine the right bid amount where your ads are still cost-effective and profitable.

Read Also: 6 Tips to Increase Business Sales with Google Ads

How Does the Click Cost Calculation Work in Google AdWords?

In Google’s auction system, Google uses a parameter called Ad Rank to determine ad placement. Ad Rank is built upon three other parameters: Maximum Cost Per Click (Max CPC), Quality Score (QS), and Ad Format Extensions. The calculation process is divided into two steps: first, calculating the Ad Rank, then calculating the paid click.

Step 1: Calculating Ad Rank in the Auction

Max CPC = The maximum cost per click the advertiser is willing to pay
QS = Quality Score (Scale of 1-10)
Ad Format = The quality of the ad format and extensions used

What is the Quality Score in Google Ads?
The Quality Score is a performance rating for keywords, with a scale from 1 to 10, where 1 is the worst and 10 is the best. This score is determined by three elements:

1. Click-Through Rate (CTR) – The ratio of how many times the ad is shown compared to how many people click on the ad.
2. Ad Relevance – The relevance of the keyword and the ad in search results.
3. Landing Page Experience – How visitors engage with the landing page.

For a simple calculation simulation, we can assume that the QS and Ad Format function as a single entity (we consider them as one QS).

For example, in an auction with 5 advertisers, each having different bid amounts and quality scores, the following simulation is applied:

Note: in real Google calculations, all bids are made in USD due to global (international) calculations, the numbers above use Rupiah for simulation purposes.

In the simulation above we can see several things:

• Anni with the biggest bid, not the one with the best Ad Rank.
• Viktor with the biggest QS (Quality Score), also not the one with the best Ad Rank.

In this way the Google Ad system is made fairer because it is not the one with the most funds that will appear above but it is necessary to optimize several aspects so that one ad has a high Ad Rank value.

Table based on Ad-Rank

Step 2: Calculating the Google Ads Click Cost to be Paid

Simple Calculation Example: Take Iwan as an Example
Ad Cost = (Ad Rank of the Lower Position / QS) + 150
= (12000 / 7) + 150
= 1864 (rounded)

Key points from the above simulation:

• The cheapest click cost is in position 3 (Iwan).
• Position 1 (Ratna) has the second cheapest cost.
  This is how the ad cost calculation works.

Types of Google Ads Costs

Using Google Ads, cost reporting can be viewed from various perspectives, including:

• Based on the basic system:
  • Cost Per Click (CPC): The cost incurred by the advertiser when the ad is clicked to visit your site, applicable to Google Search and Google Display.
  • Cost Per 1000 Impressions (CPM): The cost incurred by the advertiser when the ad is displayed on the visitor’s screen, applicable on the Google Display network.
  • Cost Per View (CPV): The cost incurred by the advertiser when a video ad is watched for at least 30 seconds or until it finishes.
• Based on formula and function:
  • Cost Per Conversion (CPC): Also known as Cost Per Acquisition (CPA), this is the cost required to obtain one conversion/goal.

As an advertiser, it is better to focus on Cost Per Conversion because the best ads are not necessarily the cheapest, but those that generate financial impact for your business.

In advertising, you will often come across the term ROAS, which stands for Return On Ads Spend. This focuses on comparing the cost of advertising to gross revenue. ROAS is easier to measure than ROI (Return On Investment) because ROI calculations involve working capital and the cost of raw materials for the product. ROAS targets are one of the funding goals that can be used with Machine Learning in Google Ads.

Read Also: Here are 7 Advantages of Using Google Ads for Business

How Much Advertising Budget is Needed for Google Ads?

Google allows advertisers to set any budget they wish. You can start advertising with as little as 100,000 Rupiah and go up to 100 million Rupiah or even more. The Google platform is open to all types of businesses, from micro businesses to large corporations.

To achieve optimal results, based on our experience, you need a minimum initial budget of 5 million Rupiah because:

• Your ads will not be optimized right from the first day.
  It takes time to optimize your ads. The first month is usually a trial period where you will experiment with different ad targets. With a limited budget, the number of ad tests will be quite restricted.
• Google’s Smart Machine requires substantial data to function optimally.
  Google’s sophisticated machine works best when it processes enough data. Unfortunately, with a very limited advertising budget, this advanced functionality cannot operate optimally.

Tips for Determining a Good Initial Advertising Budget:

• Set your regular marketing budget, and allocate 30-50% of it for Google advertising, or
• Use a budget of 5 million Rupiah as your initial advertising budget.

How to Control Your Google Ads Budget?

There are many ways to control your ad budget in Google Ads. Some of the features include:

• Daily Budget, You can set the maximum daily budget for your campaign. However, in practice, Google may automatically increase the daily budget by up to twice the amount. But if you calculate over a month, your daily budget will align with the amount you’ve set.
• Ads Scheduling,You can schedule when your ads should appear to optimize your budget.
• Device-Based Advertising,You can advertise only on desktops, tablets, smartphones, or even a combination of all three. You can also set different bids for each device.

For advertising transparency, your Google Ads account also provides payment reports with clear details.

We hope this explanation about Google Ads budgets and costs has been helpful. If you have any questions regarding this matter, feel free to leave a comment below or contact our expert team at 081288883692.

For official guidelines, you can refer to Google’s Ad Documentation page.

Also, visit our Google Ads services page to see how we can help your business grow through Google Ads campaigns.