AdWords: How much is too much for a click?

Jeremy Hessing-Lewis

With Google AdWords campaigns, the price an advertiser pays for each click is a mysteriously fluid calculation (I get something of a Wizard of Oz impression whenever dealing with Google). The below diagram is either Google’s pricing algorithm or a candy machine circa 1931. The price is tied to  your selected keywords and will vary according to a variety of factors, some of which are publicized while others we can only speculate upon. While the basic premise is that keyword bids use an auction process, the relevance of your site, your ad text, your click through rate, your ad budget and of course the the Wizard (because we can only speculate) all play a role.

My point is that how much you pay per click will vary. As an agency, we have transparency into how the same keywords can have dramatically different prices from one client to the next. Part of what we do when we manage AdWords campaigns is try to decrease these costs. The lower your pay-per-click costs, the more clicks you get within your budget.

But what if you really want a keyword with a very high price for a first page placement? How much is too much for a click? I see clicks that cost upwards of $45 each. A budget of any size would be exhausted quite quickly at this rate. Can this possibly be worth it?

For professional services, it depends (as lawyers like to say). Before you even setup a trial campaign, have a look at your clients and try and come up with a customer acquisition cost. How much can you spend to acquire each new client?

A personal injury lawyer working on a contingency basis can support a much higher customer acquisition cost than a wills & estates lawyer. Similarly, an accountancy working with medium sized businesses can spend more acquiring a single client than their volume-based personal income tax counterparts.

So is $45/click for “Car Accident Lawyer Toronto” too much? If every 20 ad clicks to your site leads to 3 phone calls (some clicks will always be wasted) and one of these calls leads to a new client, your customer acquisition cost (if you’re managing the campaign yourself) is $900. If you settle the claim for $45,000 with a 25% contingency fee, your proceeds amount to $11,250.

The question remains, is this profitable to your firm? What if the pricing could be decreased to $12/click?


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