How do you estimate your Adwords budget?

This is part 3 of a presentation transcript given to Snowsports Industry Association – the entire video can be found here: How to use Google Adwords

Now, let’s talk about how to figure out whether or not you should use pay per click, and if you use pay per click, how much should you spend? Wouldn’t it be nice if before you implemented Google Adwords campaign, you could start to look at how much will you make as a business if you use it, and then we’re going to talk about implementing Google Adwords dos and don’ts, and we’ll touch on enhanced features.

One of the first things you have to do when you are considering a Google Adwords campaign is keyword research. I just did a very general term. I typed in ‘Ski’ to a Google Adwords search tool, and I got back all these terms around the word ‘Ski’ and ‘Skis’. Now, this gives me the … This column here, is Google telling me what they would estimate the monthly search volume to be on that exact search phrase. This would tell me what the cost per click would be on that exact search phrase.

In other words, in order to appear in the top three, you’d have to bid 21 cents to be at the top for Ski doo. I have to say, I’d be surprised if that were the case, but this may be an example of Google Adwords underestimating what the actual cost is. Let’s just go ahead and say that it was 21 cents.

If we utilized a click-through rate, an average click-through rate of four percent, that meant for every 100 times someone did the search ‘Ski doo’ and my ad appeared in the results, that would be 100 times four percent, four times out of that 100 someone clicked on my ads. If I the ads were live 24/7, I’d get nearly 900 clicks every month, and if my cost per click were only 21 cents, then my monthly budget on that term would only be $186.

Now, here’s an example comparison of the word skiing. Same amount of searches. Cost per click is $3.18, same click-through rate, same traffic, but my budget for that term is almost $3,000. You can see, it can vary and we have some clients whose cost per clicks are over a $100-it’s all dependent upon the market that you’re in.

Now, the good news is this tends to be market driven, so for the term ‘Skiing’, you would hope that this term could be utilized in a profitable way but that remains to be seen at this point. Again, monthly search volume, exact match. Google estimated cost per click, it can be in the top three. Average estimated click through rates, total clicks a month, and what your montly budget would be.

Google gives you this information and this information and this information. These columns over here are my estimates based on our experience. How much should you spend? Again, with my formula, I take the search term, the monthly search volume, cost per click for top three position, and then I add the columns for an estimated click-through rate of four percent, search volume times four percent equals your monthly clicks, and your monthly clicks times cost per click gives you your monthly budget.