How to calculate cost of Adwords – Google Ads calculations formulas
How to calculate cost of Adwords – Google Ads calculations formulas

Advertising has many instant benefits like it improves the visibility of the brand, gives faster results and generates better ROI(Return On Investment)“. Google AdWords is one of the most robust online advertising program that allows you to create online ads to reach targeted audiences and offer products and services. The AdWords platform runs on pay-per-click (PPC) advertising. It needs closely monitored by PPC experts and the various matrics need to be calculated. So, to calculate those matrics this article comprises of all those Google Ads calculations formulas.

Google Ads calculations formulas

Investing in Google Ads can bring a huge impact on your business. It doubles your income if you run the campaigns effectively. For example- the average advertiser on their platform makes two dollars for every dollar they spend. Now to calculate the cost of Adwords and to measure the ROI there are numerous formulas. Let’s see.

Google Ads calculations formulas

  • CTR(Click Through rate)= Clicks/Impression *100
  • CPM = Cost/1000 impressions
  • CPA = Total coxt(per acquisition)/total no. of leads
  • Conversion rate = Conversion/Clicks
  • Total cost = Click*CPC
  • Adrank = CPC*(Quality Score+ AD- Extention)
  • Quality Score = Depends on CTR, Landing page, Ad relevance
  • Actual QS = Sum((sum of QS*impression)/sum of impressions)
  • Actual CPC = (Ad rank below competitor/ Quality Score of your) +0.01
  • ROAS(Return on Ad spend) = Revenue (or conversion value )/ Ad spends
  • ROI(Return On Investement) = (Conversion-cost)/cost of ad spend OR Revenue- cost/ investment*100
  • Cost = conversion rate* profit margin
  • Max CPC = (Avg Conversion Value/desired ROAS)*conversion rate OR (total conversion/clicks)/desired ROAS
  • Ad CTR = Clicks/Ad impression
  • Ad request CTR = Clicks/ ad request
  • Ad request RPM = (Estimated earnings / number of Ad requests)*1000
  • Ad RPM = (estimated earnings/ Ad Impressions)* 1000
  • CTR(Click through Rate) = Clicks/ Impressions
  • Coverage = (Ad requests that returned Ads / total Ad request)* 100
  • Delivery rate = Ad impression/ Ad requests
  • Drop-off rate = number of Impressions/ Matched requests*100
  • Impression RPM = (estimated earnings / Impressions)*1000
  • Page CTR = Clicks/ Page views
  • Page RPM =  (Estinmated earnings/ Number of page views)*1000
  • Query CTR = Clicks / Queries
  • Query RPM =  (Estinmated earnings/ Number of queries)*1000
  • RPM =  (Estinmated earnings/ Number of page views)*1000
  • TrueView VTR = TrueView Views/ TrueView Ad Impressions
  • conversion ratio = No of conversions/ No of clicks*100
  • CPA = Total spent/ Total conversions
  • CR = Total conversions/Total clicks cost*100
  • TROAS = Value of the product / Converted click cost*100
  • ACPC = Ad rank of the person below you/Your quality score +$0.01

READ MORE: 7-step proven strategic approach to boost Return on Ad-spends (ROAS)

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How To Audit Google Ads Budget

To make the AdWords account effective auditing is needed. Audit your existing budget to find any flaws or wasted spend that you can use.
Below are the following ways the could help you:

  • By measure Agency or expert costs to run your Ads
  • Find the waste Ad spend
  • Keep an eye on Analytics
  • Audit your tool costs

Google Ads pricing(example)

Pricing Factor Average Cost
Ad Spend $10,000 to $15,000 per month
CPC (Google Search Network) $1 to $2 per click(min bid)
CPC (Google Display Network) $1 or less per click(min bid)
PPC Management Tools $15 to $800 per month


These simple formulas will help you understand how Adwords costs are calculated and measured. Try to put all this into practice and let us know your results!

FAQ about Google Ads

Is Google AdWords Worth For Your Business?

YES, it is. It generates better ROI, drives conversions quickly, shows analytical data, targeted reach, a customizable platform, control over campaign, conquer the competitors, and many more. Thus, Google AdWords is most definitely worth it!

How much does Google AdWords cost?

it depends on your bidding and the average cost per click for advertisers.

How customers make their decision to buy a product or services?

By using Search Engines, Approx 86% of consumers use the Internet to find a local business.

Does Google AdWords work for small business or Big Enterprise?

For both, it is effective for small business(if used correctly) as well as for big enterprise.

Which is better Facebook or Google Advertising?

It depends on your goals. Otherwise, both Facebook advertising and Google AdWords can be viable paid media options.

READ MORE: Insight-driven Marketing for Pay Per Click campaign (PPC)  

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