It all comes down to managing the budget. Individuals can still play in the big leagues if they target their campaigns correctly, and the product sells.
People CAN play in the same arena. Most times, companies are not managing their budget correctly and have too many phrases in a single group/campaign causing an early termination of display and a budget that can't support itself.
When you look at the actual ad display history for many websites, you'll see people turning on and off ads for months at a time as they couldn't figure out the system. If you take a step back and target alternate phrases, the budget is lower and you'll get more impressions and clicks as a result.
I doubt any person here on HostingDiscussion is paying $35 for the phrase "web hosting" but if you target "cpanel hosting" for only $2.75/click - yes it's less views, but it's targeted to the right client in the right city
And that there is the big item in the whole thing - the right city. There's a big difference between "cpanel hosting" in Omaha than there is "cpanel hosting" in Houston or Los Angeles
$2.75 = Omaha
$6.50 = Houston
$5.20 = Los Angeles
I'd personally rather take a handful of clients going after cPanel directly than going after "webhosting" or "web hosting" and blow the budget with a few clicks.
Here's a different example:
"managed server hosting" costs between $41-$209 per click
"dedicated server hosting" costs between $21-$45 per click
While these are two different services, "managed" only gets 10 searches in a month, and "dedicated" gets 210.
Did you spend your budget wisely? Did you deliver EXACTLY what the client expected when they landed on your page, or did you drop them to your home page so they have yet another decision to make.
Your landing page is extremely important in the sales process and will make or break your AdWords campaign.
So, as Steve said, the keywords you target are going to play a factor on the budget, and your budget is going to depend on how many people you're targeting, the cost of your services and how well of a job you're doing in converting them to be a customer.
The US Small Business Administration (SBA) recommends spending between 7-8 percent of your gross revenue on marketing if you're doing less than $5 million/year
I personally think they need to update their numbers. The majority of people I've worked with over the years have spent between 10-15% of gross with 30% of that being spent on Social Media, a further 55% on SEO/SEM and 15% on banners, flyers and traditional marketing.
So if you're doing $100k/year, you should spend $10k on advertising.
That's being said knowing NOTHING about you, your brand, your target clients or any other items. Those are just the broad standards released by the SBA and other firms.