With AdWords Starter Edition, you actually decide how much your own ads will cost. You set the price you'll pay each time a potential customer clicks your ad, and you set a budget that limits how much you spend overall.

Signup fee. First things first: You'll be charged a modest one-time activation fee when you create an AdWords account. (For new advertisers paying in US dollars, the fee is five dollars. To see the activation fee in other local currencies, visit the account fees finder.) After that, you pay only when your ad is seen and clicked by a potential customer, who will then be sent to a website you specify.

How much does a click cost? AdWords is somewhat like an auction: Each advertiser decides what a click is worth to them and then bids for it accordingly. Those bids, along with other factors like the quality of ads, are then used to determine which ad will appear in each situation. With Starter Edition, you have two bidding options: You can set your own maximum click price yourself, or you can let the AdWords Budget Optimizer set your bids to try and find you the most clicks possible within your budget. When you create a Starter Edition account, the Budget Optimizer is automatically enabled. That means you set a budget, and we'll set your cost-per-click for you. You can switch between Budget Optimizer and Max CPC at any time.

If you set your own maximum CPC, you might decide to pay as little as US$0.01 (one cent) each time a potential customer clicks your ad. You can also decide to pay US$1.00 or much more for each click. As you might guess, with a very low bid your ad may not show very often, while with a very high bid your ad may show quite a lot.

Your daily costs are determined by the prices you set and the number of clicks your ad receives. If you set a price of US$0.05 per click, for example, and your ad is clicked 25 times in one day, then your total charges for that day would be US$1.25.

In the same way, you might set a total monthly budget of just a few dollars, or as much as US$5000 a month or more. If you set a monthly budget of $30.00, which is about a dollar a day, then your ad will be halted each day after it collects a dollar's worth of clicks (20 clicks at five cents each, for example). The exact amounts you select are yours to choose. In most cases, your currency's smallest denomination (for example, one cent in US dollars) is the lowest amount you can select.

You can change your cost per click and your budget at any time -- even several times a day if you like. There is no long-term contract or minimum spending limit for AdWords. You can pause your campaign at any time, which means your ads will stop showing and won't generate any new charges.

The costs of competition. Your ad will compete with ads from other advertisers who also have set their own prices. Your success will be based on how much you bid, the quality of your ad, how many other people want to advertise on the same keywords, and other factors.

Very popular topics and keywords (such as real estate or hotels) can cost more because so many other people also want to advertise on them. If you set very low prices on those popular keywords, your ad may appear only rarely or not at all. If you set higher bids on very specific keywords, your ad is likely to appear more often, and in higher positions yielding more clicks, at the price you want.

You can get a rough idea of costs and traffic for certain keywords by using our Traffic Estimator.

Starter Edition costs vs. Standard Edition costs. The Starter Edition and Standard Edition of AdWords have the same activation fee and the same self-service system of costs. Both editions allow you to set the amount you're willing to pay for each ad and set a budget to limit how much you can be charged overall. In Starter Edition you set a monthly budget for your account, and in Standard Edition you set a daily budget for each campaign, but otherwise the budgets work the same way.