HomeGoogle Ads: What Are Google Ads & How Do They Work?

Google Ads: What Are Google Ads & How Do They Work?

Every second, there are 63,000 searches performed on Google, and the majority of search results pages include Google ads. Paid for by businesses, Google ads can be an extremely effective way of driving relevant, qualified traffic to your website exactly when people are searching for the types of products or services your business offers.

In this article, you’ll learn what Google ads are, how Google ads work, and why you should run your own Google ads.

What is Google Ads?

Google offers paid advertisements which appear in search results on google.com with the use of Google Ads or advertisements that appear on other websites through the Display Network and Google’s AdSense program.

Below is an example of a Google search engine results page (SERP). The sponsored results, or ads, are denoted with an “Ad” label. There are two sections of paid Google ads, one above the “natural” or organic results and one at the bottom of the results page.

Google Ads at the top of the SERP:

what is google ads: paid vs organic results in SERP


Google Ads at the bottom of the SERP:

google ads at the bottom of the SERP

Google also offers Display Ads, which appear on the Google Display Network. The Display Network is an extensive collection of outside, third-party websites that have partnered with Google and agreed to serve Google ads. Google ads on the Display Network can be in text, image, video, or rich media format, and can be targeted differently. This includes remarketing and banner ads.

If using AdSense, your ads would appear in the selected areas on a website:

Google Ads Adsense

Why Google Ads Appear

The Google Ads auction is focused around keywords – advertisers choose a list of keywords to target that are relevant to their business offerings, the words that people are most likely to use when searching for their product. They then bid on these keywords, basing each bid on how much they are willing to pay for a Google user to click on their ad. This bid, combined with a Quality Score assigned by Google based on the quality of your proposed ad, determines which Google ads appear on the SERP. When users click the ads, the advertiser pays a certain cost (the cost per click, or CPC), which is calculated according to the below formula:

Google Ads CPC Formula

This is where the term Pay-Per-Click (PPC) originates.

Free download: Hacking Google Ads

The Google Ads Auction

To get the full run-down, head to our latest installment of How Does Google Ads Work? The Complete, Visual Guide.

Google Ads works on an auction system, which takes place every time a user performs a keyword search.

how does google ads work - infographic of google ads auction

View the full auction infographic here.

To “win” the Google Ads auctions and see your Google advertisement appear for relevant keywords, you’ll need to optimize your Quality Score and bid amount. The higher your Quality Score, in conjunction with your bid amount, the better your ad positioning. The following factors (among others) affect your Quality Score:

  • The relevance of your Google ad to the search query
  • The relevance of the Google keyword to your ad group
  • The relevance of your ad to its landing page
  • The historical click-through rate (CTR) of the ad and its ad group
  • Overall historical account performance

There are also overall benefits to having a high quality score:

  • Lower costs– Google rewards advertisers with high Quality Scores by lowering their cost per click (CPC), helping improve ROI.
  • Higher exposure – When you have high Quality Scores, your ads will display more often, in better positions on the SERP—the top vs. the bottom of the page. This enables you to get more clicks and conversions without having to raise your bids.

For more information, refer to this infographic to better understand how the Google Ads auction works.

Google Ads Costs

The cost of Google Ads varies based on a number of factors, including the competitiveness of your keywords and industry, your geographic location, the quality of your advertising campaigns and more.

average cost of google ads

In the US, the average cost per click for Google search ads across all industries is $2.32. In other countries, average costs for Google Ads are often much lower.

The Google Ads Performance Grader: A Completely Free Audit of Your Google Ads Account

There you have it! Google Ads, explained.

To maximize the impact of your Google Ads ads and campaigns, you need to know which campaigns work for your business and where to make improvements–-WordStream’s  Google Ads Performance Grader can help you do exactly that.

The Google Ads Performance Grader is the most comprehensive free tool of its kind. In 60 seconds or less, the Google Ads Performance Grader performs a thorough audit of your Google Ads account, identifying areas in which improvements can be made as well as highlighting successful areas of your account and how they compare to competitive benchmarks for your industry.

Try the WordStream Google Ads Performance Grader for free today.

wordstream google ads performance grader

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