What is Google Ads and How Does it Work?

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What do you do when you have a question? I’m betting that most of the time the answer to this question is “I Google the answer”. In the last few years, since higher mobile internet speeds were available, we answer most of our questions using online search engines. This does not account just for knowledge, it also applies for many other day to day activities like finding a gift, looking for your next home appliance or wherever you can think of.


This is a great opportunity for any type of business, to reach out to prospects and deliver them the product or services people are looking for or provide the right answer to their questions.


But since most of the markets are highly competitive and your competitors might already have a good online presence, it is not easy to gain visibility on search results right away.
Taking these points int

o consideration, search engines are offering companies to place their ads at the top of the search result page, by paying, using different approaches such as a pay per click or cost per impression. This is a great opportunity for companies to boost their online presence and to immediately gain more visibility on search engines, like google search, bing search among others.

There are several search engines, which are offering advertisement platforms. Depending on your target audience and the country you are operating in, certain search engines might suit better to your business. Since Google is the market leader, here we will focus on Google and its Google Ads platform, but you can read more about the different usage in Europe of other search networks in our “Search Share of Search Engines by Country”.

What is Google Ads?

Google Ads, originally called Google AdWords, an advertising platform offered by Google.

The basic idea is to find your prospects online whenever they are looking for a product or service, you are offering. This allows you to capture prospects when they are at their research and purchasing funnel.

So, when users attend a search request in Google by typing in a keyword, they get the results of their query on a search engine results page (SERP). This is where you can take the chance, to let prospects know about your products or service by targeting those keywords and placing your paid advertisement in the SERP section.

For example, if a user is looking for a gym in Lisbon, he will get the following result page:

You can see that the search result is divided into two sections: the paid search results and organic search results. While they are looking similar, paid search ads have a bolded “Ad” on the top of the post.

Depending on your ad ranking, your advertisement might not appear on the top of the page as it is the case here. There are a lot of other competitors bidding for the same keywords.

But how does Google decide whom to give the first spot? Let’s dive closer in how Google Ads works and what you should take into consideration to improve overall performance.

How Google Ads work

After creating a Google Ads account, you can start to create campaigns and bid on certain keywords.

Google Ads as previously mentioned, uses mainly a pay-per-click (PPC) model although over the year Google has evolved also into other methods of online advertising, such as display and shopping ads which we will cover in another article together with Google display network.

 Marketers create their ads with keywords they would like to target. For each keyword Google allows you to set a maximum bid, a bid strategy and the maximum you are willing to pay for an ad. The right amount of your maximum bid depends on several factors: competitors, ad relevance, landing page experience and expected click-through-rate.

The latter three, ad relevance, landing page experience and expected click-through-rate are forming together the quality score. Google is determining your quality score by considering how relevant your advertisement is for the customer’s search query and how well your landing page is done. These points are taken into account by Google, to provide an overall good customer experience after conducting a search.

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How much does advertising on Google Ads cost?

Marketers can set a maximum daily budget for their ad. This way you will never spend more than a specific amount per day. There are three options for bids:

  •  Cost-per-click (CPC): The amount you need to pay when a user clicks on your ad
  •  Cost-per-mille (CPM): A fixed amount you need to pay per 1000 ad impressions (it is counted every time your ad is seen)
  • Cost-per-engagement (CPE): The amount you are willing to pay when users perform a specific action on your ad (sign up a list, watch a video etc.)

Depending on your Quality Score you might pay less for each advertisement. Google pairs your bid together with your Quality Score to determine your Ad Rank. This means if you have a good Quality Score but might have a lower bid, your ad will still be ranked higher than those with a higher bid but a lower quality score.

This auction is done each time a user is conducting a search on Google, to determine the ad positions of each advertisement. Let us dive deeper into how Google Ads auction works.

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How does Google Ads auction work?

Each time a search happens on Google, the auction starts to determine whether your ad is actually shown for the targeted keyword and which ad position it will hold.

Here is how the auction works:

  1.   After a user is conducting a search on Google, Google Ads system will start to find all ads with keywords matching that specific search and which are eligible.
  2.   Google then enters the keyword from your account into the auction together with the information of your maximum bid and quality score.
  3.   In the next step it determines your Ad Rank by multiplying your maximum bid and your Quality Score.
  4.   The actual price you must pay with each click (CPC) will be determined by the Ad Rank of the next highest ad below you divided by your Quality Score.

This process is run with every search conducted on Google to finally determine whether an ad is shown in the search result pages, which ad positions the advertisement is holding and which CPC the advertiser has to pay.

To run campaigns on Google Ads platform can be time-consuming from the initial keyword research, the actual Google Ads campaign building to constantly monitoring and improving your performance. In Link37 we are specialized in PPC advertisements and deliver expertise in Google Ads Platform. Lets us help you to run successful PPC campaigns to grow your business!

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