What Are Google Ads And How Do They Work




We are in the middle of dealing with the coronavirus and the corresponding economic impact on our economy.

What is a good marketing investment right now? Google Ads. With Google Ads, if you do it right, you can generate leads quickly and close new business which is super important.

According to Mary Ellen Coe, President of Google Customer Solutions,

In 2018, our search and advertising tools helped create $335 billion in economic activity for millions of businesses, website publishers, and nonprofits across the country. Each month, we drive over 1 billion connections for businesses nationwide, like phone calls or online reservations. We're also connecting businesses with customers overseas; in 2018, more than 35% of clicks for U.S. business advertising on Google came from places outside the U.S.

Oh yes! Google Ads are perfect for small businesses who want to connect with customers and make more money in a short amount of time.

In today's article, we will talk about what Google Ads are and how they work.

Buckle up because here we go!

Google Ads: What Are They?

Google Ads, formerly known as Google AdWords, is Google's advertising platform or system. With Google Ads, advertisers can bid on specific keywords for their clickable ads to appear in Google's search results.

Through Google Ads, you can:

  • Promote your business.
  • Sell products or services.
  • Raise awareness of different vital causes.
  • Boost traffic to your site.

Advertisers can create and change their ad campaigns at any time, including their ad text, settings, and budget. Google Ads accounts are conveniently managed online.

Is it expensive? Well, it can be. There's no minimum spending amount. You can set and control your budget. Also, you choose where your ads appear, set a budget that's comfortable for your business, and easily measure the impact of your ad.

Everything with Google Ads can be tracked, which makes it incredibly easy for you to ensure you are getting a return on your investment.

All good news, right?

Now let's talk about how Google Ads works.

Google Ads Auction: How Does It Work?

Three things happen within the Google Ads system when an auction is triggered. It all starts with:


A Query

A query is any keyword or phrase that a person uses to look up something on Google, which triggers a Google Ads auction.

It can be any keywords or phrases like ones below:

  • "Christmas shoes"
  • "Christmas shoes for boys"
  • "Shoes to buy for Christmas"

Google Analyzes

Google then analyzes the Ads advertisers pool and decides whether an auction is needed after users use search keywords or phrases in the search engine.

Please take note that before an auction, Google narrows down all the available ads to figure out which ones are qualified to bid to show on their Google pages. Here are some ways that this happens:

  • Ad Targeting - Google only considers ads that are relevant to the content or users of a site. Through placement-targeting, Google also finds ads from advertisers who have specifically chosen to show ads on their pages when they have found a match between their offerings and their site's users.
  • Ad Format - Advertisers can create text or image ads and choose contextual-targeting or placement-targeting. So depending on their selection, some types of Google ads could be shown on their pages.

An Auction Is Triggered

An auction is triggered if more than one advertiser bids on keywords that Google considers relevant to the search query.

But what exactly gets entered in Google Ads auctions? Head on to the next part of this article.


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Identify Your Google Ads Keywords

When you join an auction, you identify keywords that you want to bid on, how much you want to spend, and create keyword groups that are paired with ads. You need some serious keyword research skills in identifying the keywords you want to bid on.

Google then enters the keyword from your account that it considers the most relevant into the auction with the maximum bid you have identified as well as the associated ad.

So what happens next? How does Google select which ads will be shown?

Once you have entered into the auction, Google analyzes three factors to identify which ads appear, and in what order. First, the maximum bid, then the quality score, and at the end, the expected result from ad extensions and other ad formats.

The first two factors are the most critical! The formula below shows how maximum bid and quality score determine Google Ads ranking.

Google Ads Ranking Formula

Let's talk more about these ad ranking factors in greater detail.


Maximum Bid

You are basically telling Google Ads the maximum amount you are willing to pay for a click on your ad whenever you place a bid. Do not worry, your Google ads bill is often at a minimum, and you can change or reset your bid at any time.


Quality Score

Another factor that Google Ads looks at is the relevance and usefulness of your ad and the site it links to, to your target audience, aka Quality Score. Better quality Google ads lead to lower prices and better ad positions.

The Quality Score is summarized on a scale of 1 to 10. It includes the expected clickthrough rate (CTR), relevance, and overall user landing page experience.


The Expected Result From Ad Extensions And Other Ad Formats

You have the opportunity to add additional information to your ads, like your business phone number, or additional links to specific site pages when you create Google Ads. These are called ad extensions.

Google measures how ad extensions and other ad formats you use will affect your overall advertising performance.

You can still get a top ad position at a lower price by utilizing highly relevant keywords, ads, and extensions even if your competition has higher bids than yours.

How Much Does A Google Ad Cost?

You pay the minimum amount you can pay for the position you win if you get a click on your ad.

Here's how the cost per click (CPC) is calculated:

Google Ads - Ad Cost Computation

Below is a sample computation which shows the cost per click of 4 different advertisers:

Google Ads - CPC Sample

Notice that the advertiser on a higher position can pay less due to a high quality score.

If Google Ads auction doesn't fit your business' online advertising needs, you can still choose from other alternative bidding methods.


Cost Per Mile (CPM)

Cost Per Mile (CPM) or Cost Per Thousand Impressions bidding is based on impressions. This type of bidding method is usually combined with CPC bidding.


Cost Per Acquisition (CPA)

Cost Per Acquisition (CPA) or Cost Per Action helps advertisers get plenty of conversions at or below the target cost-per-action that they set.

Google Ads uses historical data about a campaign and evaluates active contextual signals during bidding. It automatically finds a maximum bid for an ad each time it's fit to appear. To achieve an average Cost Per Acquisition equal to a target across all campaigns using this strategy, Google Ads sets the bids.

And that's a wrap!

Google Ads can be a great way to quickly generate leads for your business.

Check out the recommended resources below if you want to learn more about Google Ads. Also, don't hesitate to TALK TO US if you need additional assistance.

Recommended Google Ads Resources

Google AdWords Made Simple: A Step-by-Step Guide

Google Ads: What Are Google Ads & How Do They Work?

5 Things Google Ads can now do automatically

So what do you think about this article? Are you ready to launch a Google Ads campaign that will make your business more money?

Leave a comment below and let's discuss.

Also, it would be a great honor if you think this article is SHARE worthy. Until next time!

Are you looking for more online advertising help? Check out our Ultimate Guide to Online Advertising for Small Businesses.


We'll show you how to create a simple, effective marketing plan in minutes!

This is the exact same marketing plan we use for our business  and our clients.

It's simple and easy to use. Isn't it time you started seeing consistent, repetable results with your marketing? It all starts with the RIGHT plan...

Header image courtesy of JumpStory.

About the author, Tim Fitzpatrick

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