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Module 1: Understanding the value of online advertising

1.5 What you pay

AdWords gives you control over your advertising costs and there's no minimum amount that you have to spend. Instead, you set a daily budget and choose how you'll spend your money.

Choosing a bidding strategy

Choosing how you'll spend your money means choosing how you'd like to bid. Try choosing a bidding strategy based on your goals, such as whether you want to focus on getting clicks, impressions or conversions.

We'll go over your bidding options in more detail later, but here's an overview of the strategies:

  • Cost per click (CPC): If you want to focus on clicks on your ads and drive traffic to your website, you'll want to use CPC bidding.
  • Cost-per-thousand impressions (CPM): If you want to focus on impressions - the number of times your ad shows - and increase awareness of your brand, you'll want to use CPM bidding. Note that CPM bidding is available for Display Network campaigns only.
  • Cost per acquisition (CPA): If you want to focus on conversions - which is when people take a specific action on your website after clicking one of your ads - you'll want to use CPA bidding.

Setting a daily budget

Your daily budget is the amount that you're willing to spend each day, on average, for each ad campaign in your account. The amount is entirely up to you, and you can edit it whenever you like.

When you set your bids, you set the maximum amount that you're willing to pay for either 1 click on your ad, 1,000 ad impressions or 1 conversion. Your actual costs will likely vary from auction to auction. But even though your actual costs may vary, your daily budget puts a limit on how much you can accrue in costs over the average number of days in a month (30.4).

For more guidance on setting the right budgets and bids, take a look at this video:

How much you're charged

The final amount you're charged depends on what type of bidding strategy you choose.

If you're using CPC or CPM bidding, the actual amount you'll be charged is no more than what's needed for your ad to appear higher than the advertiser immediately below you.

If you're using CPA bidding, the actual amount you'll be charged might exceed your specific bid because the actual amount depends on factors outside of Google's control, such as changes to your website or ads, or increased competition in ad auctions. Bear in mind that our system is designed to adjust over time, so the longer you use CPA bidding, the less likely it is that your actual CPA will exceed your specific bid.

Example

Antoine advises that Fiona's ad campaign should use the CPM bidding strategy. After Antoine explains how CPM bidding works, Fiona wants to know how much she'll be charged.

Let's say that the maximum amount Fiona wants to bid is £2.00 and other advertisers' bids for the same ad position are £1.50 and £1.75. Fiona won't be charged more than what's needed for her ads to appear higher than the advertiser bidding £1.75.

Additional study materials

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