What is Google Ads (AdWords) Guide by bannerTag.com

Google Ads (formerly Google AdWords and Google AdWords Express) software lets advertisers to bid on phrases and words to get their ads featured on Google Search Engine. Google Ads (AdWords) was launched in 2000 and it was the first advertising product for the company. It was mainly focused on helping small to medium sized businesses to advertise and reach potential customers online.

What is google ads (AdWords)? The company is now offering brands, media agencies and advertisers to buy ads on Google platform in search, play app store, maps, YouTube videos and other sites across the web.

Where can you advertise?

Three main advertising types Google Ads campaign can be set up:

  1. Search – Text ads that are shown when a user searches for a product or a service in Google. These ads are usually the first to appear before the other search results.
  2. Display – Usually image, javascript or HTML5 ad units. Display ads appear on websites or apps where AdSense is enabled.
    You can check the most popular mobile and desktop sizes by Click Through Rate (CTR) here. This can definitely help you with setting up highly targeted campaigns.
  3. Video – YouTube ad campaigns, usually 6 to 15 seconds. These ads appear right before or during the video content.

How The Google Ads Search Auction Works?

It all starts with a query. When someone is searching for something on Google, the algorithm looks at the Google Ads (AdWords) advertisers and determines whether or not there is going to be an auction. If there is at least one advertiser bidding on the keywords Google believes to be relevant to the search query an auction is triggered.

Advertisers add keywords on their end when setting up the campaigns. For example: “technology news” and “news online free”. With pre-set maximum bid prices these keywords are sent to the auction. Keep in mind that keywords are not search queries, “technology news” could be entered into a wide range of results, such as “news about iPhone” or “what is new in tech”.

When the keywords are specified, Google then places them into the auction with the maximum bid that the advertiser has configured. There can only be one entry into any search query from a single account.

When the auction has received a new entry – keyword, Google then looks at two main factors that determine where the ad ranks: maximum bid and quality score.
Quality score gives a general sense of quality of the ads. For each keyword a score of 1-10 is given by Google. Three main factors that will determine your ad quality score are:

  • Ad relevance.
  • Expected clickthrough rate.
  • Landing page experience.

Ad Rank = CPC Bid * Quality Score

How Google Determine What an Advertiser Pays?

Advertiser Price = Ad Rank of the Position Below / Your Ad Quality + 0.01

The formula works in such a way that the top ads will be the most relevant to the user, therefore resulting in higher click through rates. For example a smaller bid with higher quality score will most likely be higher up in the query than a bigger bid with bad quality score. This also means that high quality advertisers are able to find the best potential customers at the lowest possible prices. (if they do it right)

How The Display Network and Ad Auction Works?

The banner ad auction works in a very similar fashion as the google search ads. The difference here is that the placements are placed on websites through AdSense advertising platform, sold in Google Ads (AdWords) which is working as an auction. Here the ad relevance is determined by the placement rather than the query and bids are set up at the group level rather than the keyword level. The ad that is shown to the end client is displayed based on the content of the website, user cookies, behaviour and of course the bid price.

Bidding Methods

There are three bidding methods that Google has made available:

  1. CPC – Cost per click. Advertiser only pays when a user clicks on the ad.
  2. CPM – Cost per thousand impressions, meaning an advertiser will pay when a user sees an ad.
  3. CPA – Cost per acquisition. An advertiser pays for each acquired paying customer.

Most Common Questions Answered

What is the best way to use Google AdWords?

For advertiser it is recommended to try and use all of the products that Google offers. Such as search, YouTube, website ad banners and maps.

Is Google AdWords free?

You can search keywords for free, as well as create online campaigns. The account creation does not require any costs. To run a campaign you do however have to pay for your bids.

Does Google Ads (AdWords) work?

Depends on how you have set up the campaigns and competitiveness of keywords that you are bidding for as well as relevancy of the campaign settings. For most we have found that Google Ads work extremely well when targeted correctly.

How to Advertise With Google Ads

All you need to do is head over to Google AdWord Ads and set up a new advertising account. You can use your already created Google account and start setting up the campaigns right away.

How Much Does Google Ads (AdWords) cost?

A lot of factors determine the cost of the advertising campaign. Such as the target country, the competitiveness of the keyword, quality of the user, quality of the ad, the maximum bid price as well as the campaign settings (for example letting Google to choose the best bid automatically).

How many times does a Google auction run?

The auction gets run billions of times each day, the results are displayed in such a way that the ads are the most relevant to the user at that time. Advertisers connect with real potential customers at the lowest price possible (if the campaign is set up properly and correctly). In turn Google earns billions of dollars in revenue.

How does Google Ads or AdWords bidding work?

The position of the ad is determined by calculating the ad rank (Ad Rank = CPC Bid * Quality Score). The best rated ad gets to be displayed at the top positions of the search query or at a banner placement on a website through AdSense ads. The actual CPC is determined by the next ad that is ranking lower/below. Google recently switched from second price auction to first price auction. This means that the advertiser will pay the exact amount of bid placed instead of paying +0.01 higher than the next smallest bidder.

What is CPC?

Cost Per Click (CPC) is the amount an advertiser pays for each click on the ad.

How does Conversion Optimizer work?

Conversion optimizer is Google Ads (AdWords) bid manipulation tool. The optimizer relies on historical data collected through conversion tracking. Campaigns need to have at least 15 conversions in the last 30 days in order to be used. Bids are based on CPA model – cost per acquisition, where you pay only for users acquired.
You can check Better Metrics for more insights on your Google Ads data.

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About Alvils Karlštrems

Alvils Karlštrems is an Ad Operations Specialist. Knows all the ways how to optimize ad delivery on websites.

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