Are Google Ads Worth it for small business?
Before spending any money, it's worthwhile asking if Google Ads are worth it for small business. Not all businesses will get a return on investment from Google Ads. It's important to research before you start to ensure that Google Ads will benefit your business.
This requires understanding if an audience is actively searching for your product or service, how many people are searching for you, and how much you will need to pay per click and, ultimately, per acquisition.
Suppose there is no active audience searching for your product or service. In that case, Google Ads is unlikely to be profitable for your small business.
To work this out for your business, follow our step-by-step process below to make an informed decision.
Steps to answer: Are Google Ads worth it for small business?
The general process is to answer the following:
Are people searching for you – Yes / No?
Is there sufficient volume and the number of clicks you'll likely get?
How much you'll need to pay for each click, i.e. the Cost Per Click
What conversion rate will you have, and what is the value per conversion
Calculate an estimated ROI for your ads.
To help identify the above, particularly people searching for you, the following research is helpful to understand who you are targeting properly.
Identify your business goals.
Before you answer the question are Google Ads worth it for small business you should understand what it is you want to achieve with the ads. For most small businesses, it's about generating leads and sales.
However, you may also be interested in raising brand awareness or educating an audience.
These goals are needed to consider how Google Ads can help you achieve them and help you research your audience properly.
Research your target audience.
The next step in the are Google ads worth it journey is to be clear on the audience you need to target, including their needs and wants.
If you can understand your target audience, you can identify the right keywords and targeting options, which can give you a data-driven assessment of whether Google's search ads will help you achieve your business goals.
Analyse your competition.
It's also helpful to research what your competitors do with Google Ads. By researching your competitors using Google Ads, you can learn a lot about how to use Google Ads effectively. You can see what keywords your competitors are bidding on, what their ad copy looks like, and what landing pages they use.
To do this:
Use the Google Ads Auction Insights report. If you are already running Google Ads, this can be a helpful report to identify competitors running Google Ads and how you compare against them. The report will show your impression share, overlap rate, outranking share, and top-of-page rate.
Use a Google Ads competitor research tool. There are several tools in addition to this, such as SEMRush.com, can help you research your competitors' Google Ads campaigns. These tools can show your competitors' keywords, ad copy, landing pages, and more.
Search for your competitors' keywords.
You can search for your competitors' keywords on Google and see what ads appear. This can give you a good idea of what your competitors are bidding on and their ad copy.
- Analyse your competitors' campaigns. Once you have a list of your competitors' keywords and ad copy, you can analyse their campaigns. Look for patterns in their keyword targeting, ad copy, and landing pages. This information can help you to improve your campaigns. As an aside, try and focus on your main competitors. Don't try to research all of your competitors. Instead, focus on your main competitors that are performing well.
- Pay attention to ad extensions. Ad extensions can increase the effectiveness of your ads by making them more visible and informative. Pay attention to the ad extensions that your competitors are using and see if there are any that you can use as well.
Do your keyword research and estimate your cost and benefit.
Keyword research is the first step in assessing whether Google Ads can be worth it for small businesses. Before launching a campaign, dedicating time to keyword research enables you to assess the level of traffic and the associated cost per click. This process empowers you to estimate your budget requirements and potential return on investment (ROI).
A good tool to do this research is Google's Keyword Planner tool.
To do keyword research to estimate the costs and benefits of Google Ads, follow the below steps:
- Identify your relevant keywords. What words and phrases are people using when searching for your products or services? You can use keyword research tools like Google's Keyword Planner tool and SEMrush to find relevant keywords.
- Estimate the search volume of these keywords. This information will help you estimate the potential traffic you can generate from each keyword.
- Estimate your cost per click (CPC). The CPC is the dollar amount you pay each time someone clicks on your ad. The CPC for each keyword will vary depending on the competition for that keyword and the industry that you are in.
- Estimate your conversion rate. The conversion rate is the number of sales or leads as a percentage of people who click on your ad.
Once you have estimated your search volume, CPC, and conversion rate, you can start to estimate the costs and benefits of Google Ads for your business. Here is a simple formula:
Estimated cost per conversion = CPC / conversion rate
For example, if your CPC is $2 and you get 100 clicks, this will cost you $200.
But clicks are not conversions (i.e. leads or sales). The ability to convert clicks to your landing page is key.
If you convert clicks or visitors to your landing page at a conversion rate of 5%, with 100 visitors, you will have five conversions (leads or sales).
You can now estimate your cost per conversion by using the above formula, which is
$2 (CPC) / 5% (CR) = $40 (Estimated cost per conversion).
This means it will cost you an average of $40 to generate a conversion from each click.
However, the Cost per Conversion only means something with context. The context here is the value of each conversion. With this dollar amount, you can estimate whether the ads would be profitable and thus make Google Ads worthwhile. Every business will be different depending on your profit margin.
For example, if you sell a product for $100 and your profit margin is 20%, then the value of each conversion is $20.
Once you have estimated the cost and value per conversion, you can start calculating your Google Ads campaigns' return on investment (ROI).
To do this, divide the value per conversion by the cost per conversion.
ROI = value per conversion/cost per conversion
ROI = $20 / $40
ROI = 0.5 x 100 (50%)
For example, if the value per conversion is $20 and the cost per conversion is $40, then your ROI is 50%. This means that for every $1 you spend on Google Ads, you can expect to earn $0.50 in profit.
Of course, these are just estimates. Your actual costs and benefits will vary depending on your campaigns, industry, and target audience. However, this formula can give you a good starting point for estimating your business's profitability of Google Ads.
Here are some additional tips for doing keyword research for Google Ads:
Consider your target audience. What search phrase is your target audience likely to use when searching for your offering? Keep your target audience in mind when choosing keywords.
Use long-tail keywords. Long-tail keywords are more niche or specific. They can be less competitive than other short-tail keywords. Targeting long-tail keywords can help you improve your click-through rate (CTR) and reduce your CPC.
Use negative keywords. Negative keywords are those words not relevant to your ad. For example, if you sell cupcakes, you might want to add the negative keyword "free" to your campaigns to stop your ads from appearing for searches like "free cupcakes."
Are Google Ads worth it depends on these factors.
Set up a campaign to test if Google ads are worth it.
Once you understand your business goals, target audience, competition, and whether it would be profitable, you can set up a test campaign. This will allow you to see how your ads perform and adjust as needed.
Are Google Ads worth it can't be understood without some research and calculation to be clear on the potential return on investment. The key is to understand the keywords you would target, the volumes of these keywords, and the cost per click you would need to pay. With these, you can calculate a return on investment from your ads, providing the context of conversion rate and value per conversion.