A click on your ad has no price list. The price is set in an auction, and the amount you bid is only one of its inputs.
But you need a number for the budget before you launch the campaign.
I'll show you how to work it out backward from your target revenue, target cost of sale and margin. The management fee is a separate item. I broke it down in my piece on what Google Ads management costs.
What you pay for on Google
With cost-per-click (CPC) bidding, you pay for each click on your ad. The maximum cost per click is the highest amount you're willing to pay for one click. The amount you actually pay is often lower.
The auction makes the difference. Ad Rank takes into account, among other things, your bid amount, the quality of your ads and landing page, the Ad Rank thresholds, the competitiveness of the auction and the context of the person's search. You pay only what's minimally required to clear the Ad Rank thresholds and beat the Ad Rank of the competitor immediately below you.
What goes into the price depends on where the ad runs.
| Where the ad runs | What you pay for | What affects the price |
|---|---|---|
| Search | a click on the ad | your max. CPC, the auction and the Ad Rank thresholds |
| Google Shopping | a click on the ad; you don't enter keywords | product data in Merchant Center and the auction |
| Performance Max | by channel: Search, Shopping and Display per click, YouTube in-stream ads on a CPM basis, Gmail per engagement, Promoted Pins on Maps per view | Smart Bidding based on conversion probability, your conversion actions and, optionally, a ROAS or CPA target |
In Shopping, ads are built from the data in Merchant Center, that is, from your product feed. In Performance Max, you define the conversion actions you care about. Smart Bidding then sets bids in real time based on conversion probability.
The budget, though, stays in your hands.
Budget: a daily average and a monthly cap
You set the average daily budget on the campaign. It isn't a cap for a single day: on any one day, the campaign can spend up to twice the average you set. Over the whole month, though, it won't exceed 30.4 times the average daily budget.
So plan in months and derive the daily average from the monthly figure. A monthly budget of $12,000 divided by 30.4 gives an average daily budget of $395. From that, a single day can come to as much as $790. The figures come from the example calculation.
A budget calculated from revenue, cost of sale and margin
The calculation uses numbers you already have. Cost of sale is costs as a share of revenue, that is, your ad spend relative to the revenue the ads bring in. The formula: target revenue from Google times target cost of sale gives you the monthly budget.
Example: an online store wants $80,000 a month in revenue from Google and targets a 15 % cost of sale. The budget comes out at $12,000 a month. The revenue and the cost of sale are inputs for this example, not typical values for an online store.
| Input | Example | Where you get the number |
|---|---|---|
| Target revenue from Google | $80,000 a month | your revenue plan and current orders from Google |
| Target cost of sale | 15 % | how much of revenue can go to advertising |
| Gross margin | 35 % | your calculation of purchase prices and selling costs |
| Monthly budget | $12,000 | revenue times cost of sale |
| Average daily budget | $395 | monthly budget divided by 30.4 |
Then check the target cost of sale against your margin. Gross margin as a percentage is the ceiling for cost of sale, and above that line an order from advertising loses money. In the example calculation, with a 35 % margin, the target cost of sale is 15 %, which is below the ceiling.
With a 35 % gross margin, $80,000 in revenue leaves $28,000. Advertising at $12,000 takes just under half of that, and $16,000 remains for other costs and profit.
The margin is an input for this example and comes out differently for every online store. If what's left after advertising doesn't cover inventory and profit, bring your target cost of sale down, and the budget falls with it.
In audits I see budgets built on a guess, with no link to revenue or margin. As an illustration: $6,000 a month, because that amount seemed reasonable. Against it stands the $12,000 from the calculation above, backed by a revenue target and a limit on cost of sale. Both amounts are examples. But the calculated number is one you can defend to the owner and to yourself. The guess isn't.
The whole calculation rests on measurement. Smart Bidding can't work without conversion tracking turned on. When GA4 is missing some of your conversions, the cost of sale you calculate the budget from shifts too.
Is your cost of sale somewhere other than where you aimed? Check measurement first, then account structure. For the second step, an independent PPC audit is the right fit.
What costs nothing on Google
Free listings show your products at no cost on Google Search, Google Maps, Gemini, YouTube, the Shopping tab, Google Images and Google Lens. The conditions are product data with the required attributes and a verified online store URL.
Google Business Profile is free and manages how your business shows up on Maps and Search. It runs alongside your paid campaigns and doesn't take any budget. But you have to supply the data for the listings and the profile yourself.
Summary
- With CPC bidding, you're charged per click. You choose the maximum yourself, and the amount charged is often lower.
- The auction decides the price. Ad Rank takes more than your bid into account, and the system charges the lowest amount that's enough to beat the advertiser below you.
- The daily budget is an average. One day can come to double, and monthly spend won't go past 30.4 times the daily average.
- You get the number from revenue and cost of sale. Multiply your target revenue from Google by your target cost of sale and compare the result with your margin, so that after advertising there's enough left for profit and other costs.
- Without conversion tracking, the calculation doesn't hold. Smart Bidding needs tracking turned on. Missing conversions in GA4 distort your cost of sale too.
- Some of Google's space is free. Free listings and Google Business Profile cost nothing, but both come with their own conditions.
Google Ads costs as much as you let it spend. That's why the budget comes from your own revenue and margin.
Take your target monthly revenue from Google, multiply it by your target cost of sale and divide the resulting monthly budget by 30.4. Set that amount as the average daily budget, then compare the cost of sale in your reports with the target from the calculation.
