There's no denying that Google AdWords is the leading online advertising option for marketers. It's an effective way to reach a target audience online. And it lets advertisers reach people in both search and display networks.

Did you know there are more than a million Google AdWords advertisers? The platform has helped many brands make an impact on their target markets. So, how does Google AdWords work? And could it work for you?


The science behind a search query on Google

As you might have guessed, the AdWords platform has close ties with the Google search engine. When you type a query into Google, quite a few things happen behind the scenes before you get results.

So, what happens when you enter a query and hit the search button? Well, the first thing is Google retrieves a list of relevant results. These get drawn from a pool of organic search listings. But, that's not the only thing that happens.

At the same time, Google looks through the list of AdWords advertisers for relevant ads. When it finds some, it uses an algorithm to display them alongside the organic search results. When you do a search on Google today, the results pages get split into two.

The upper 20% of so of the page consists of a few AdWords ads. The remaining content comprises of organic search results. Until recently, Google also displayed some ads on the right-hand side of results pages. They decided to go for a simpler layout due to more people using mobiles to search.

How do AdWords ads get displayed?

Ads get shown on search results pages through a process known as bidding. When you do a new AdWords campaign, you’ll create a series of ads that get people to visit your site.

The thing is: how you create each ad and where it links to on the Web is important. Why? Because those details determine where your ads get placed.

When you create an ad, you have to assign one or more keywords and phrases to it. If a person searches for any of those keywords, an “auction” gets triggered. As you can appreciate, you have to “bid” on those keywords.

One might think that the higher the bid, the higher up their ads will show in a search results page. But, there’s more to AdWords campaign management than that! Other factors influence the “rank” or weight of an ad.

First of all, there is the question of relevancy. Let’s say that you make an ad for your dog grooming website. If your ad focuses on keywords like “dog grooming”, your ads will have a higher rank. But, if you bid on keywords like “animal care” or “pet accessories”, your ad will rank lower.

The second influencing factor is landing page quality. In case you didn’t know, the landing page is the one on your site where your visitors will go to after clicking your ad.

Let’s assume that your ad for dog grooming includes the right keywords. If you direct people to a blog or contact page, your ad won’t rank so well. Now let’s say your ad instead directs to a “Dog Grooming Services” page. No prizes for guessing how that will impact your ad performance!


Quality score

When managing AdWords campaigns, one thing you will notice next to each ad is a ``Quality Score``. This is an indicator of how well each ad is likely to perform when it goes live. Quality scores get ranked on a scale of one to ten, with the latter being the best quality.

The price you pay for your AdWords campaigns will depend on each ad's quality scores. In layman's terms, poor quality scores mean higher advertising costs.

Google AdWords is a complex and powerful way to target an online audience. But, it can also be a confusing one for people new to the platform. As a result, many firms opt for AdWords professionals to manage their campaigns for them.


How much do you pay for each ad?

As you know, Google AdWords works on a system of bids in a virtual auction. It’s an event that occurs only when someone searches for one of your selected keywords. If no-one ever searches for them, you won’t pay anything. You only get charged when an auction gets activated at the point of search.

The cost for each ad will depend on its ad rank and maximum bid. Those two key factors will determine your ad placement and how much you pay.

First of all, let’s take a look at ad rank. To calculate this, Google takes your maximum CPC (cost-per-click) bid. It then multiplies that by your quality score. The result is your ad rank. So, for example:

– $2.00 CPC x 10 (best quality score) = an ad rank of 20.
– $8.00 CPC x 1 (worst quality score) = an ad rank of 8.

As you can see, the first example will perform the best. It has a 10/10 quality score. You’ll also notice the lower cost compared to the worst example. That’s because ads with higher quality scores don’t attract high bids.

To keep one’s costs down, any AdWords expert worth their salt will create ads with a high quality score. If you take the lazy approach and just make a high bid, you’ll end up paying a lot more for your advertising. Plus, it will usually be in vain because your ads won’t appear near the top of the search results page!

So, we know how Google ranks your ad when someone searches for your keywords. But, how does AdWords know what to charge you? As you can imagine, it knows the ad ranks of you and your competitors.

Google uses a simple formula to determine your actual CPC price. It is as follows:

– Preceding competitor’s ad rank / quality score + 0.01.

How does that work in real terms? Let’s stick with the best quality score example from earlier ($2.00 CPC with an ad rank of 10). Now, let’s say your preceding keyword competitor has a $4.00 CPC with a quality score of four.

Using the formula from earlier, your CPC cost is $1.61. Your competitor will have to pay $3.01!

By now, you’ll have noticed an obvious trend with Google AdWords: quality. Masting the advertising platform can be a learning curve for many people. It’s often cost-effective to have AdWords professionals manage campaigns instead. Why? You save money, even taking into account AdWords consultant fees.

Alternative bidding

Some people assume the only way to bid in an AdWords auction is by using the CPC (cost-per-click) method. It might surprise you to learn there are two alternative options.

The first is CPM or cost per thousand impressions. Instead of paying when people click on your ads, you pay based on the times your ads get shown. CPM bidding is useful for advertisers that want to focus on brand awareness.

The second is CPA or cost per acquisition. This only works if you've already run a CPC campaign. Why? Because it calculates your new CPC based on historical data.



Get Started!

Those of you new to Google AdWords may find it easier to have a campaign set up by an AdWords specialist. Doing so means you can have a campaign that returns the best AdWords ROI. Afterwards, you could take over if you wish.

AdWords can often be a learning curve for people new to the platform. By getting a campaign set up by a professional, you’ll benefit from relevant ads and lower costs.