How does Google AdWords Work?

Last updated on 

May 19, 2022

by

The VA Reviewer
How does Google AdWords Work

Using Google Ads to boost your ROI (return of investment) could be the wisest decision you ever make. Every day, people use Google 3.5 billion times to search for things they want or need to know. 

Every search is an opportunity to get your company’s name in front of more people. With increased visibility comes increased lead generation, conversion rates, and sales are part of this strategy.

It is where Google Ads (formerly Google Adwords) may be helpful. Google Ads helps you advertise and promote your products and services when users search for relevant terms. If executed correctly, it can double or triple your leads and sales.

This article will tell you what Google Ads are, how they work, and how you can start using them right now for your business.

What is Google AdWords?

Google AdWords, presently rebranded as Google Ads, is a powerful internet advertising tool that allows companies to reach individuals worldwide and grow their reach. 

Google displays its query results on a search engine results page (SERP) when users search for a keyword. Among the results could be a paid advertisement targeting that keyword. 

Businesses may target customers across two networks using Google AdWords: the search network and the display network.

On the search network, advertisers bid on relevant keywords. It allows them to target users who use those keywords in a Google search query with their adverts. Paid search results appear either at the top or bottom of the page and a small ad icon.

Meanwhile, the display network allows advertisers to place banner ads on Google-owned websites.

What exactly is Ad Rank?

The Google AdWords system is primarily a live auction in which advertisers place a ‘bid’ in the AdWords system to secure a specific ad position. 

Achieving the desired position of the ads depends on other advertisers’ competition and price bids. The primary factor determining the actual ad position is your highest bid multiplied by your quality score.

While the maximum bid is the amount you’re willing to pay when viewers click on your ad, the quality score refers to how well an ad is optimized, the quality of the landing page, your expected click-through rate (CTR), and the relevance of your ad to searchers. 

The higher your ad rank, the more chances your ad appears in Google search results.

Google rewards high-quality ads and well-performing AdWords campaigns with lower per-click costs, higher ad ranking positions, and a higher likelihood of appearing in top placement above organic listings.

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How do Google Ads work?

Google Ads uses the pay-per-click (PPC) model. Marketers bid on a specific term on Google, competing with others bidding on the exact phrase.

Your bids are also known as “maximum bids,” or the most amount you are willing to spend for a particular ad. For example, if your maximum price is $4 and Google finds that your cost per click is $2, you’ll get that ad spot! Your ad will not appear if the cost is more than $4.

You may also set a daily spending limit for your advertisement. You’ll never pay more than a set amount every day on that ad, giving you more control over how much your digital ad campaign should cost.

Marketers have three options for placing bids:

  • Pay-per-click advertising (CPC). You pay a fee each time a user clicks on your ad.
  • Cost-per-mille (CPM). It sets how much per 1,000 ad impressions you are ready to pay.
  • Cost per engagement (CPE). It refers to how much you’ll pay when a user clicks on your ad and takes a specified action.

Google then combines the bid price with an evaluation of your ad, known as a Quality Score. The scale is numbered one to ten, with ten being the best: the higher your score, the higher your ranking. 

Google determines your Ad Rank by your Quality Score and the amount you bid. This ad rank determines where your ad will appear on the search results page. When a user sees an advertisement and clicks on it, the marketer whose website the ad was displayed receives a small commission (thus pay-per-click).

The idea is that the more users who click on a marketer’s advertisement, the more likely the ad will meet the objectives (e.g., become a lead, make a purchase).

Types of Google Ads:

Google provides several campaign types that you can use:

Search campaign

This ad appears as a text ad on the keyword results page. These are the ads you’ve probably seen the most. They are marked with a black “Ad” sign next to the URL on the search results page.

Shopping campaign

A shopping campaign enables you to promote your products in a much more visually appealing manner. These advertisements may appear as images on the search results page.

Display campaign

The Display Network uses Google’s extensive website partners to display your ad on various websites around the internet. They might occur in several different ways. 

You may have your ad displayed on third-party websites; you can also have a video ad appear as a pre-roll before YouTube films, and Google also lets you market your ad on its email platform Gmail. 

Finally, you can have your ad shown in Google’s app network in third-party apps. In terms of style, the advertisements themselves are also adaptable. Your advertising can be in the form of a gif, text, video, or image.

Video campaign

Pre-rolls are advertisements that show at the beginning of YouTube videos. If you have a top-notch video ad idea that you want to try out, this is the way to go. The video campaign ads are available in a variety of formats. Skippable video advertising, discovery ads that appear on the search results page for specified keywords, and numerous overlays and banners are also available.

App campaign

App advertising, like video ads, is part of the Display Network and can be used for targeted campaigns. You don’t have to create every app ad for this. Instead, they’ll take your words and whatever assets you have, such as images, and make the ad for you. The program evaluates several asset pairings and favors the one that performs the best.

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How Much Does Google AdWords Cost?

The fee charged to advertisers by Google AdWords is determined by the currently running advertisement.

Your ads will be displayed for free because Google AdWords is a pay-per-click advertising platform. You’ll only pay if someone clicks on your ad on Google’s search results page. Furthermore, since the AdWords system is based on a live auction, the click price is determined by the level of competition and the amount of money they are willing to pay for a click.

When used precisely, Google Ads can drive high-quality traffic to a website for a fraction of the cost of other forms of advertising.

However, if you don’t properly manage the process, prices can quickly rise, and you risk attracting low-quality visitors. To run a profitable Ad campaign, you must first understand the factors that influence the cost of each click, which include:

  • Keyword competition
  • Maximum bid and bid position
  • Your average monthly budgets
  • Click-through rates
  • The quality score of your keywords

If you target high-volume keywords with many monthly searches, you could end up paying much money per click, anywhere from a few cents to over ten dollars.

To keep track of your AdWords spending, create a daily budget at the campaign level. You have complete freedom to change this at any time. 

Starting with advertising should preferably be modest and with a bit of funding. Based on the insights and quality of leads, you can determine whether to increase your budget or stop a campaign.

Are Google Ads Effective?

Both large and small businesses can use Google Ads. When done correctly, it’s a low-cost advertising method that can target qualified, in-market prospects.

Understanding sponsored search, bidding methods, keyword research, account structure, and so on is critical to making Google Ads work for you. Calculate your budget for each campaign, create a daily budget, and keep track of your spending.

If you are still unsure if Google AdWords is worth it, start small, tweak based on results, and scale up if your campaigns generate reasonable and profitable sales.

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