What is Google AdWords and How it Works?

What is Google AdWords?

An advertising service offered by search engine giant- Google, Google AdWords allows businesses to display their ads on Google and it’s advertising network. Herein, advertisers suggest specific keywords in series for their clickable ads to be displayed in Google’s search results. It is when the advertisers pay for the clicks, Google earns money from these searches.

Frequently used Terms:

  1. Campaign – A set of ad groups (ads, keywords, and bids) that share a budget, location targeting, and other settings. Campaigns are often used to organize categories of products or services that you offer.
  2. Ad Groups – An ad group contains one or more ads which target a shared set of keywords.
  3. Bidding Strategy – It defines how an advertiser sets the bid type to pay for viewer interaction with his ads.
  4. Impressions – An impression is a measurement of how many times your ad is shown.
  5. Quality Score – A quality score is Google’s rating of the quality and relevance of both your keywords and PPC ads. It is used to determine your Cost Per Click (CPC), multiplied by your maximum bid to determine your Ad Rank in the Ad Auction process.
  6. Ad Rank – Ad Rank is the value that is used to determine an advertiser’s ad position (where ads are shown on a page relative to other ads) and whether the ads will show at all.
  7. Click Through Rate (CTR) – Click Through Rate is the measurement of how many people who have seen an advertiser’s ad clicked through to the destination link.
  8. Landing Page – It is clearly defined as the page on the website on which the advertiser draws traffic from the ad.
  9. CPC – Cost-Per-Click (CPC) is the actual price an advertiser pays for each click in the PPC campaign. It is the most common bid type on Google AdWords.

CPC = Total Cost / number of clicks

  1. PPC – Similar to CPC, Pay Per Click (PPC) is an online advertising model wherein an advertiser pays a publisher i.e. Google AdWords, each time someone clicks on their ad.
  2. Keyword – A word or phrase looked up in a search engine which reflects matching and relevant results. A lot of websites offer to advertise targeted by keywords, such that an ad will only show when a specific keyword is searched upon.
  3. Keyword Match Types – Google defined keyword match types as ‘parameters that can be set on your keywords to control which searches trigger your ads to appear. Ideally, there exist 4 different types of Keyword Match Types in Google AdWords, they are-
  • Broad Match
  • Broad Match Modifier
  • Phrase Match
  • Exact Match
  1. Conversion – According to Google Support’s definition; ‘An action that’s counted when someone interacts with your ad (for example, clicks a text ad or views a video ad) and then takes an action that you’ve defined as valuable to your business, such as an online purchase or a call to your business from a mobile phone.’
  2. Cost per Conversion – It is basically the total cost paid for an advertisement in relation to the success in achieving the goal of that advertisement.
  3. Conversion Rate – Conversion Rate is the metric that measures & determines how many prospective customers perform the desired step of action. : fill the query form, subscribe to the newsletter, drop a feedback, etc.

Types of Google Ads:

1. Search Ads

The ad appears above the organic search results on Google.

Google search ads

2. Display Ads

With text and banner ads across Gmail and a network of over two million websites and apps, your ad can show up where your consumers are.

Google Display ads

3. Video Ads

Your business comes to life when interfaced with new consumers on YouTube. It’s a unique way to share your story.

Google Video ads

4. App Ads

Promote your app by running ads across the entire Google network — no design is required.

Google apps ads

5. Shopping Ads

Shopping ads refer to the type of ad that features detailed information about specific products that you sell.

Google Shopping Ads

Features of Google AdWords:

Access History of Quality Score

Earlier, Google didn’t grant access to view previous days’ quality score of a keyword. However, the search engine giant recently showed graciousness by enabling advertisers to view the historical QS data along with its individual factors i.e. expected CTR, ad relevancy, and landing page experience. The historical report can be accessed by:

               Keywords tab > Columns > Modify Columns > Quality Score

Features of Google adwords

Advanced Geo-targeted Advertisements

This feature comes as one of the basic requirements for any marketer. With bountiful options to target, identify the areas/locations where the positive results can be expanded thus lowering the least performing regions such that it impacts the overall Return on Investment (ROI).

Automatic Bid Adjustment feature

Another interesting worth noticing the feature of Google AdWords is ‘Automatic Bid Adjustment’. It readily allows the advertisers to track the search impression loss metric and keep fluctuating the budget along with bids. You can do this by adhering to the following steps:

     Campaign/Ad Group/Keyword/Ad Tab > Automate >  Change max CPC bids when

Aforementioned are quite a few features of Google AdWords but upon practicing the same, an advertiser can explore more features.

How does Google AdWords work?

The working mechanism of Google AdWords majorly depends upon a key factor which is — the competitiveness of the keywords that advertisers are suggesting. Additionally, the relevancy of the keywords to real-conversions is equally crucial for the effectiveness of the business operations. Given below is the structure of a Google AdWords account:

Google Adwords Account

The image clearly defines the hierarchy basis which the AdWords function. Let’s understand how Google AdWords actually works?

Whenever a user makes a Google search, Google AdWords was taken into consideration all the advertisers who have made the bidding on that keyword and accordingly, calculates the Ad Rank for the keyword. Herein, Quality Score which is the measurement from Google based on factors such as the relevancy of an ad headline, description, keywords and destination URL; plays a crucial role

Thus, Ad Rank is calculated as follows:

Ad Rank =  Quality Score of the keyword x Bid

Thus, the ads that are above the Ad Rank are chosen in the search result. Hence, it is the Ad Rank that decides the position of the ads; wherein, the ad with the highest Ad Rank grabs the first position while the one with the lowest Ad Rank scores the last position.

The following tabular representation exemplifies it well:

Position Quality Score (QS)Bid ($)Ad RankActual CPC

 Actual CPC = (Ad Rank of the advertiser below you / Your Quality Score) + $0.01

On careful observation, you can infer that every advertiser is paying less than the actual bid amount, except for the last advertiser). This is indicative that lower the ad rank of your competitor and higher the Quality Score, the lower amount you pay to AdWords.

So, you are all ready to start bidding and become a Google AdWords personnel. Go start bidding!

Author Bio:

 Jasleen kaurJasleen Kaur:Content passionate, Jasleen is designated as Sr. Associate- Content Marketing at Digital Vidya. Besides handling the content writing and marketing activities, she leads Digital Marketing Internship Programme.

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