Paid search advertising can be a valuable tool to increase brand awareness, collect leads and convert “browsers” into “customers”. In order to realize value from these opportunities however, marketers need to accurately budget for their SEM campaign.

As a pay-per-click form of advertising, marketers are charged when a user clicks on their ad, and the amount charged per click can vary significantly based on factors that can change in each auction. These fickle factors include which keyword caused the ad to appear, the max bid amount for that keyword, what competitors are bidding (and how much) as well as how relevant Google Ads judges the ad to be to the user, keyword and landing page.

Despite these uncertainties, here are some things that can help to budget for an SEM campaign.

Media Costs

The most obvious cost associated with an SEM campaign is the money that goes directly to Google Ads to pay for each click. Here are some questions to ask yourself as you consider how much to spend on media costs.

Have you run a similar campaign before?

While factors may change between campaigns over time, looking to the media costs from an earlier campaign may be a good place to start.

How expensive are your target keywords, and how much traffic are they getting?

This is one of those fickle costs that will vary throughout the duration of your campaign, and what you estimate at the beginning will likely differ from your campaign’s reality. Despite this, it’s important to look at potential keyword costs as part of the initial keyword research in setting up your campaign. Tools like the Keyword Planner in Google Ads and Semrush can help with these estimates.

Note—not every impression leads to a click, so when looking at these estimates you should only factor in a percentage of the total impressions as possible clicks that your campaign might receive. One way to do this is research what the average click through rate is for paid search ads related to your industry and use that value to help estimate how many clicks may come from your keywords.

How many days will your campaign run for? And will it run all day, every day, or part of the day/week—like only during business hours on weekdays?

In Google Ads marketers set the maximum value they want to bid for a keyword, but also the maximum amount of money that the campaign as a whole can spend each day.

Once you have an idea of the average cost of your target keywords and the amount of search traffic (possible clicks) they could see, you can use these in combination with the total number of days in your campaign to estimate media costs.

Agency Fees—The Cost of Labor

The less obvious factor in estimating SEM campaign cost stems from time spent to actually build and manage the campaign. This may come in the form of either a time/opportunity cost if you or a member of your team are running the campaign internally, or it may involve paying a marketer or agency to do this for you.

Here are some questions to help you think through these costs, though your marketer/agency will need to fill in some details such as their hourly rate and how much time they require to complete these tasks.

Are you going to set up your SEM campaign yourself, or will you have someone set it up for you?

Performing keyword research, writing ad copy and actually setting up the Google Ads campaign can each translate to costs incurred at the start of the campaign. And that’s assuming that you already have a landing page to send these ads to.

Depending on the goals you have in mind for your campaign, the level of complexity and content, and the number of stakeholders weighing in and their level of involvement this initial set up could take a couple of hours to upwards of a couple of weeks. Do stakeholders want to review and vet every keyword that the marketer recommends adding to the campaign? Do they want to review all ad copy and have the opportunity to request up to two rounds of revisions on each ad?

Consider a campaign that only meets Google Ads’ bare minimum requirements for a campaign—3 simple ad groups with 20 or fewer keywords, 3 ads and one (preexisting) landing page each.

If you plan for one hour of keyword research per ad group, two hours for writing responsive/expanded ad copy across the campaign and an hour for setting up the campaign in Google Ads, initial setup would require 8 hours of labor.

Note that there are some areas described above that can benefit from economies of scale if you need to add more ad groups/keywords. For example, more keywords per ad group may not require more time for writing ad copy though it may require more time for keyword research. Similarly I’ve found that headlines and sometimes descriptions can often be applied across multiple ad groups, so writing copy for the first ad group may take less time than writing ads for the last ad group.

There are also some time-saving mechanisms like using Google Ads Editor which may also influence total setup cost, but this should at least help to provide some context for these costs.

After the initial set up, how frequently do you anticipate monitoring and optimizing the campaign, and how much time will you spend doing this? How often do you want to see updates and performance reports?

A good practice is to review and adjust SEM campaigns at least monthly after launch, though some campaigns may benefit from more frequent check-ins. Ironically, campaigns with fewer media dollars can benefit most from more frequent checks to ensure that the campaign is not overspending its limited budget. It’s good to plan on at least one hour per month of time to spend in Google Ads reviewing campaign performance and making adjustments to the campaign, though campaigns can get by with less review time.

Similarly, status updates and formal performance reports take time to prepare, which translates into additional cost if you are hiring a marketer or agency to maintain your campaign.

It was common to prepare quarterly performance reports with brief, monthly status updates for the SEM campaigns I worked on, though some clients opted to save money on reporting by limiting the number of formal reports to just one annually.

While the time needed to create a status update can be taken from the time available for the monthly review, the needed time for formal reports can vary based on the format of the report. PowerPoint slides, while visually appealing with the flexibility of being pulled into other decks for different teams, were the most time-intensive to create, making them the most expensive.

On the other hand, we eventually moved to a dashboard style of reporting, using data connections to automatically draw Google Ads data into a report template that we built ourselves. At this point, all that was left was to prepare and add insights related to campaign performance during the relevant time period.

This dashboard approach does incur additional cost at the beginning of the campaign, but the increased efficiency in reporting will save money in the long term, especially if the dashboard is repurposed for future campaigns.

Summary

This post focuses on how to estimate how much an SEM campaign could cost to implement and maintain. Many factors, some that fluctuate and vary widely, contribute to both daily and overall media costs of an SEM campaign. This makes preparing an initial budget estimate for a brand new campaign challenging.

Alongside the direct cost of clicks on SEM ads, the decision to hire someone to manage the campaign can incur additional setup fees and hourly costs over time.

Asking yourself the questions in this article can help you to more accurately estimate the total cost of your campaign, or at the very least, help to provide some additional context to the estimate your marketing agency provides.

One last question—what is a click worth to your business?

Value is another factor worth considering when calculating how much to spend on a campaign. What does a click on an SEM ad mean for your business?

Are you trying to increase brand awareness/consideration, and a click on your ad helps to further this goal?

Is there an action users can take after clicking your ad, like filling out a form or completing a purchase, that would make their click more valuable?

Can you assign a dollar value to that brand awareness or that conversion?

While a lot of the other questions discussed help you to uncover what you could spend on SEM, having an idea about the value the campaign can bring will help define what you should spend.

Photo by Artsy Crafty on StockSnap