Wow, didn't realize adwords and FB ads are so expensive. How do small businesses compete? are there any alternatives for those with smaller ad budgets?
From my experience with adwords/fb ads, this is not normal. The reason the cost is so high is because they're targeting ads to things like "bass" instead of "learn bass from scratch" in Sacramento, CA. The more specific you are, the less competition and the easier to target and win on keywords. The tough part is that being a strong force in the Sacramento, CA Bass market for new players from scratch is not a billion dollar idea.
Sometimes, more specific actually means more cost - in B2B, I've seen roughly $15 and $7 CPC for heavily contested keyword phrases, and know of a competitor that bids over $30 CPC for a particular phrase.
A slight aside, but although it's definitely market forces at work, I'm certain Google inflates CPC prices before those market forces take hold, forcing the hand of smaller players.
They used extremely broad keywords and phrases that are by definition expensive to bid on. For example, one of the terms in the screenshot was "bass lessons".
What is that? Bass guitar or bass fishing? If this were a real business, not only would you be overpaying due to poorly phrased, non-specific ad title, you'd also be hit with Quality Score penalties by Google if you had too many users clicking through in search of bass fishing lessons and exited the page when they realized it was bass guitar.
You kill the idea because it is so expensive, if you cannot easily reach consumers for a small amount of money then the demand side is low. It's cheaper to reach consumers who are willing to click links because they actually need a service.
That's not quite right. Ad pricing is a marketplace like any other. The "demand" in the marketplace is demand by advertisers to get in front of any particular set of eyeballs. The price will be high if many advertisers are interested in the same group of people (and low if not). Price is an important metric for determining customer acquisition cost but you can't use it to infer customer demand. You instead use impressions, click through rates, and conversions rates to do that.
Generally correct, but do watch out for some recent changes by Google, where you pay what you bid instead of being charged the lowest next bid even if you set your bid higher.