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What is Google Ads and How Does it Work?

Nowadays, everyone uses online search engines — whether it’s to search for a product or to look for answers on a specific subject.

That is a massive opportunity for any business to reach potential customers by delivering the product they are looking for or providing them with the right answer to their questions.

But because most markets are highly competitive and your competitors may already have a strong online presence, it’s not always easy to gain visibility in search results right away.

Search engines offer businesses the ability to show ads at the top of the search results page by paying according to a pay-per-click (PPC) model. That creates a great opportunity to increase online presence and gain visibility instantly.

There are several search engines that offer advertising platforms. Depending on your target audience and the country you operate in, certain search engines may suit your business better.

Since Google is the market leader, in this article we’ll focus on Google and its Google Ads platform.

Table of Contents

1. What is Google Ads?

2. How do Google Ads work?

3. How much does Google Ads cost?

4. How does the Google Ads auction work?

1. What is Google Ads?

Google Ads, originally known as Google AdWords, is a pay-per-click (PPC) advertising platform offered by Google.

The core idea is to find prospects and repeat customers online whenever they are searching for a product or service. That allows you to reach them while they’re already in the search and purchase funnel.

When users search on Google by entering a keyword, they see results on a search engine results page (SERP). This is where your ad can appear — by targeting those keywords and placing a paid ad within the SERP.

Search results are split into two sections:

• Paid search results

• Organic search results
  
  

They look similar, but paid ads are marked with a bold “ad” label.

Depending on your ad ranking, your ad may not appear in the top spot — there are usually many competitors bidding on the same keywords.

So how does Google decide who appears first? Let’s explore how Google Ads works and what impacts performance.

2. How do Google Ads work?

Once you create a Google Ads account, you can start building campaigns and bidding on specific keywords.

Google Ads uses a PPC model. Marketers create ads around keywords they want to target. For each keyword, Google allows you to set a maximum bid — the most you’re willing to pay for a click.

The best bid amount depends on several factors:

• competitors

• ad relevance

• landing page experience

• expected click-through rate (CTR)
  
  

The last three factors — ad relevance, landing page experience, and CTR — contribute to your Quality Score.

Google uses Quality Score to evaluate how relevant your ad is to the user’s search query and how good the user experience is after the click. The goal is to deliver the best possible experience to the searcher.

3. How much does Google Ads cost?

Google Ads costs are based on an auction system that runs every time a user searches on Google. That auction determines:

• whether your ad is shown

• where it appears (position)

• how much you pay per click
  
  

To understand cost properly, we need to look at the auction process.

4. How does the Google Ads auction work?

Every time a search happens on Google, an auction starts to decide if your ad is eligible to show for that keyword and what position it will get.

Here’s how it works:

1. A user searches on Google, and the system finds eligible ads whose keywords match the query.

2. Google enters the eligible ads into the auction, combining each advertiser’s maximum bid and Quality Score.

3. Your position is determined by multiplying your maximum bid by your Quality Score (Ad Rank logic).

4. The actual price you pay per click is influenced by the competitors around you — essentially, the next highest ad’s rank relative to your Quality Score helps determine your final CPC.

This process runs on every Google search to decide:

• whether ads are displayed

• which positions they appear in

• what CPC advertisers pay
  
  

From keyword research to campaign setup and ongoing optimisation, running Google Ads can be time-consuming — and it requires continuous monitoring and improvements.

Final note

At Link37, we are experts in PPC and have extensive experience managing campaigns on Google Ads. Let us help you run successful PPC campaigns to grow your business.