Real Estate Webmasters' PPC guide will tell you all about PPC advertising for real estate: what it is, how it works, and what it's good for.
In this section we'll cover the cost of PPC for real estate. Note: This post was updated in May 2023 to reflect more recent data.
The Cost of Real Estate PPC
The cost of a real estate PPC campaign is whatever you decide to pay on top of any fees you pay to a PPC company to manage your campaigns. PPC companies usually also set a minimum monthly spend to ensure adequate data and activity to work on. However, these factors only determine the total cost of a PPC campaign. What most are actually concerned with is what they will be getting for that money.
In the rest of this article we will be comparing REW's performance against industry benchmarks on a number of key metrics. Industry benchmarks are provided by LocaliQ's Google Ads Industry Benchmarks report for 2022-2023. We'll also be covering some ways that PPC like REW keep ad campaigns working in a cost-effective way. Let's get started.
- Cost Per Click: What is the expected CPC in real estate?
- Conversion rate: What is the expected real estate PPC conversion rate?
- Cost Per Lead: What is the expected PPC cost per lead in real estate?
- What should your monthly PPC budget be?
- How do PPC specialists keep costs down?
Cost Per Click
Cost per click (CPC) refers to the amount an advertiser pays each time a user clicks on their ad. It is a pricing model used in PPC advertising in contrast with other models where you might pay for impressions, views, or simply placement.
The typical CPC across most industries is between $1.50 and $7.00, while in real estate the average CPC is usually between $0.50 and $4.00. In general, the average cost per click in real estate is approximately half the average across all other industries combined.
While you may think that your CPC would be equal to the amount that you bid on a keyword, in fact you only pay the amount that's required to rank above the next competitor ad, taking into account all the factors that go into determining the winner of the auction. Put simply, the amount you pay per click is usually a little higher than the bid of your next closest competitor.
If you'd like a refresher on how Google Ads auctions work, read the explanation in Part 1 of our real estate PPC guide.
Industry Average vs. Real Estate Webmasters
In 2022, REW PPC clients paid approximately 62% the industry average for each ad click:
- Industry average CPC (2023): $1.55
- REW average CPC (2022): $0.97
Real Estate Webmasters' expert management means that our PPC services are cost effective when it comes to bringing in traffic from ads.
Factors Affecting Cost Per Click
Why does CPC vary so much? Here's a short list of what can affect a keyword's CPC:
- Ad quality - Compelling ads improve the click-through rate, which improves Quality Score
- Website quality - High-quality landing pages have higher Quality Scores
- Ad position - Quality score being equal, you have to bid higher to show up higher
- Campaign age - Google optimizes a campaign over time, decreasing costs in the long run
- Keyword competition - The more advertisers competing for your keyword, the higher you have to bid
- Locating targeting - Costs will vary based on who you're advertising to
- Seasonality - The supply and demand of advertisers vs. searchers fluctuates throughout the year
While actual cost per click can vary depending on several factors, including keyword or industry competitiveness, the quality and relevance of the ad and landing page, and the overall performance of the ad campaign, advertisers can still control their budget by setting a daily limit.
Note that a higher cost per click is not necessarily good or bad. For example, paying more per click in cases where there is a higher conversion rate and conversions also have a relatively high value can be worth it because you'd still expect to get a good return on your ad spend.
In real estate, the PPC conversion rate is the percentage of visitors from ad clicks that become leads. In general, a lead in real estate is anyone who has expressed interest in buying, selling, or renting a property. However, in order for a lead to be actionable for follow up they need to take some kind of action that puts you in contact with them. This could be through a phone call, email, filling out a contact form, inquiring about a listing, or registering on your website.
Conversion rate is an important metric because it indicates whether your ads are effective with regards to your target audience. It's also important to set up and enable conversion tracking so that your campaigns can properly optimize. There are cases where a higher conversion rate might not be good, say if your conversion threshold is too low, if you're spending too much, or if you're exceeding your capacity to follow up and close on those leads.
Industry Average vs. Real Estate Webmasters
Once again, REW outperformed the competition with a conversion rate around 60% higher than the industry average.
- Industry average conversion rate (2023): 2.88%
- REW average conversion rate (2022): 4.74%
Remember: that's just an average. Conversion rates can vary greatly depending on the season, market and specifics of the campaign.
Factors Affecting Conversion Rate
Like CPC, the conversion rate can be affected by a variety of on-site and external factors. These factors include:
- Registration settings - Do you ask users to register to see listings?
- User experience - Does your website impress the visitor?
- Number of listings available - Do you provide valuable information?
- Market competition - Does the visitor have other options?
- Real estate niche - Certain property types have higher conversion rates than others
- Seasonal fluctuations - Conversion rates typically increase in peak selling season
Because of this long list of factors, even campaigns within the same market can experience wildly different lead counts.
Cost Per Lead
What is cost per lead in real estate?
For most real estate businesses, the important measure for determining the cost of a PPC campaign is the cost per lead. Cost per lead is the average amount spent on acquiring a potential customer in the form of lead.
Cost per lead is a useful metric because it will tell you whether you're spending too much or too little and whether you're getting a good return on your investment. So what is an expected cost per lead in real estate? According to one source, the average cost per lead in search advertising for real estate is $66.02 per lead.
There are two main methods for calculating your cost per lead:
First, you could take your total ad spend and divide by the total number of unique leads. For example, if you spend $10 on a campaign that gets 10 clicks through to your landing page and 1 of those clicks is from a user that signs up to view listings on your website (giving you their contact details), then you have 1 lead for a cost of $10 making your cost per lead $10.
Alternatively, you could use CPC and conversion rate, like so: Cost Per Lead = Cost Per Click / Conversion Rate
Both calculation methods will give you the same result.
Industry Average vs. Real Estate Webmasters
Here's where it all comes together. On average, clients using Real Estate Webmasters PPC services pay around 70% less than the industry average per lead.
- Industry average cost per lead (2023): $66.02
- REW average cost per lead (2022): $20.29
An important disclaimer about cost per lead...
Just like home prices vary from market to market, cost per lead will vary too (that's not to say cost per lead directly correlates with housing prices).
Without first running your campaign, you can't truly know your campaign's cost per click, conversion rate, or cost per lead with any certainty, and if anyone ever promises a specific cost per lead, run the other way.
Cost Per Lead in Competitive Markets
In highly saturated markets, or those in the luxury real estate space, you can expect a rough cost per lead of $20-50.
Cost Per Lead in Less Competitive Markets
In small-to-mid-sized American markets and all Canadian markets, we typically see cost per lead range from $5-30.
What Should Your PPC Budget Be?
Once you've estimated your average cost per lead, you can determine your monthly budget. Your monthly budget is the easiest way to control your overall PPC spend, as this is a limit which you set that Google won't exceed.
As a general rule of thumb, we recommend that you aim to generate 1-2 leads per day per agent, especially when you're just starting out.
Here's how to calculate your monthly advertising spend budget:
Number of agents x leads per agent per day x expected cost per lead x 30.4 days
Using our average client data, here's an example calculation for a single agent who wants to generate 2 leads per day:
1 agent x 2 leads per day x $20.29 per lead x 30.4 days = $1,233.63
Most agencies that run PPC will also charge a management or program fee, so take that into account when setting your budget. Of course, you should also factor in the cost of the website you're driving leads to as well.
How To Keep PPC Costs Down
The role of a PPC specialist is to allocate your PPC budget where it will be spent most efficiently. Without proper management and expertise, costs can quickly spiral out of control. In addition to specifically allocating budget between keywords, ads, and campaigns, PPC managers have several other methods for controlling spend. Here are a few commonly used strategies:
- Target CPA (Cost Per Acquisition): Advertisers set the average amount they are willing to pay per conversion. The bidding algorithm then automatically adjusts the CPC to achieve conversions at or below the target CPA. This strategy is typically used by businesses with a high capacity to service leads and a high total budget, but who are concerned about the profit margin on each converted lead. Target CPA is also useful in markets with changing seasonal demand, as the campaign will automatically adjust to bring in more or less conversions as they are available.
- Target ROAS (Return on Ad Spend): Target ROAS is similar to target CPA as advertisers specify the percentage of revenue they want to generate for each dollar spent on advertising. Target ROAS differs in that it works primarily where different conversion types (say, ecommerce sales) have different values, allowing for ad spend to be directed to conversions with higher returns.
- Max CPC: The max CPC setting determines the maximum amount to be paid for a single ad click. Max CPC can be set at different levels of the campaign all the way down to individual keywords with certain manual bidding strategies.
- Enhanced CPC: Enhanced CPC is a bidding strategy that automatically adjusts CPC bids based on the likelihood of a click resulting in a conversion. Google Ads analyzes historical conversion data and adjusts bids in real time to increase the chances of conversions. This strategy helps advertisers optimize their ad spend by allocating more budget to clicks that are more likely to lead to conversions. This is especially useful in cases where conversions are high-value.
Bids can also be adjusted up or down depending on things like the device used, demographic data, and location.
So to sum up, an experienced PPC manager can manage and reduce the cost of a PPC campaign by:
- Creating high-quality compelling ads
- Creating relevant and engaging landing pages
- Curating target and negative keywords
- Setting bid adjustments based on device, location, and so on
- Setting an ad schedule
- Setting the right bid strategy
- Experimenting with ad formats and extensions
- Monitoring conversion performance
The right PPC specialist can truly make or break your campaign.
As with all forms of marketing, PPC can be unpredictable. An individual PPC client's cost per lead is very tough to predict.
In general, you should expect a cost per lead between $20-30 unless you're in a very competitive market.
Thankfully, experienced PPC specialists play a huge role in keeping costs down. Even with a program or management fee, you'll typically see much lower costs than running the campaign yourself.
If you're interested in real estate PPC services, you're in the right place. We at Real Estate Webmasters are Google Certified Premier Partners, working exclusively for real estate professionals.
Check out our PPC services page to learn more.
Continue the Real Estate PPC Guide
How much should I pay for PPC?
The cost of PPC varies depending on factors like industry, keywords, competition, and ad quality. It's best to set a budget based on your business goals and test different strategies to find a balance between cost and performance.
Who pays for PPC?
Advertisers pay for PPC campaigns. They set a budget and pay for each click on their ads. In cases where an agency handles campaign management, payment for ads can either be done by the agency or the client.
Why is PPC so expensive?
PPC can be expensive due to competition for keywords and the auction-based pricing model. High demand for popular keywords drives up costs, but effective targeting, ad quality, and optimization can help improve cost-effectiveness.
What is the difference between CPC and PPC?
PPC refers to the overall strategy where advertisers pay for clicks, while CPC is the specific amount paid for each click.
How much does PPC usually cost?
The cost of PPC can vary significantly depending on factors such as industry, competitiveness, and target audience. It can range from a few cents to several dollars per click. Advertisers can set their budget and adjust it based on campaign performance.
How much should I spend on PPC?
The amount you should spend on PPC depends on your business goals, competition, and available budget. Start with a smaller budget, analyze performance, and gradually increase spending as you optimize campaigns and see positive results.