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How does Google determine the cost of a click?

[ Edited ]
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# 1
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Just trying to establish how clicks are charged for to see if it is a worthwhile advertising medium .If I have a low budget and it is used up in say 4 clicks then is it worth advertising ? I know that overall value is on whether you get business as a result of a click but need to have a rough idea how it works .

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How does Google determine the cost of a click?

[ Edited ]
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# 2
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AdWords advertising is best looked at as a law of averages, or statistical phenomena.  An individual click is unlikely to lead to a sale or transaction. Sometimes people like what they see but have to warm up to a product, service, or supplier after clicking and studying a website. Typically when clicks occur, the conversion rate is around 1-4% if it is for a popular product/service backed up by a strong website. That's one to four "leads" or sales per 100 clicks. 

 

The best way to think about it is to allocate a certain budget monthly towards an advertising campaign, then focus on the lead flow and the cost per lead or sale.  Focusing on the number or clicks, or the cost per click is really the wrong thing to focus on; it's too far down in the weeds. 

 

4 clicks would be too small of sample to learn anything, about any business i can think of.  A campaign really needs to accrue at least 100 clicks before you even start to learn how it's going to work (or not).  Otherwise, the sample size is too small.  

 

I suggest you review Google's tutorials on AdWords, and there are many good books which can be browsed at the library. Here's a Google overview:

 

https://support.google.com/adwords/answer/6349091?hl=en

 

If you share a bit more about the type of business and what you are trying to achieve, some of the experts here could probably share more detailed and relevant advice.

 

hth!

Re: How does Google determine the cost of a click?

[ Edited ]
Top Contributor
# 3
Top Contributor

Here you are, as explained by Google's chief economist;

 

Moshe, AdWords Top Contributor , Twitter | Linkedin | Community Profile | Ad-Globe
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How does Google determine the cost of a click?

Badged Google Partner
# 4
Badged Google Partner

Hello Barbs S, 

The Video given by @MosheTLV is the best explanation of how the ad auction works, that I have found. Also keep in mind that you are the only one that knows what is a good lead is to you. So for example, a $100 lead might be great if you are selling cars, but not so great if you are selling gum. Smiley Happy   Google AdWords is a great advertising tool and worth the time it takes to learn it properly. In the beginning, it may feel like trial and error but in the long run (it is my experience that) it is worth it.