Are you having trouble navigating the complexities of Google Ads? You’re not alone. A lot of businesses face confusion when managing and optimizing Google Ads campaigns.
Without a basic understanding of how Google Ads works, you might be wasting your marketing budget, missing out on potential customers, and falling behind the competition.
Understanding how Google Ads works might be challenging. However, with the proper knowledge, you can turn it into a powerful tool that drives sales, leads, and website traffic.
This guide will break down how Google Ads works in simple terms, covering everything from setting up campaigns to advanced features such as AI and Smart Bidding. In addition, this guide will give you insights on how to launch successful campaigns and optimize your return on investment (ROI).
What is Google Ads?
Google Ads is an online advertising platform that allows businesses to create ad campaigns that appear across Google search ads, Google display networks, YouTube, and Google Shopping.
It’s a pay-per-click (PPC) advertising model or digital marketing model where you only pay when someone clicks on your ads. It’s a way to buy visits to your website rather than getting them organically.
The primary purpose of a Google Ad is to attract traffic to your website, whether you’re aiming to increase your product sales, generate leads, or improve brand awareness. With the effective use of audience targeting, you can concentrate your campaigns by focusing on specific markets based on location, demographics, interests, and online behavior. This ensures that your ads have reached the right people at the right time.
How do Google Ads work?
The Google Ads auction
When a user searches a query in Google Search, an auction takes place in real time to determine which ads will appear in the search results. The auction occurs every time a search is made, even though users do not see it.
Advertisers bid on the keywords they want to target, not on how much you’re willing to pay. Then, Google determines the position of your ads on several factors that go beyond your bid.
The most important among these factors is the ad rank. This helps decide where your ad will appear on the page. If your ad has the highest ad rank, you’ll be placed in the top search results, while others are placed lower or on subsequent pages. The Google Ads auction uses a combination of cost-per-click (CPC) bids and other elements, such as quality stores, to ensure that the most relevant ads are displayed to the user.
However, bidding more doesn’t mean your ad will appear at the top stop. Google aims to provide the best user experience, so it focuses on displaying ads that are both relevant and useful. This means that users get to see ads that match their search intent, which increases the click-through rate of the ads.
Key factors in ad ranking
Understanding how Google Ads decides your ad ranking can be complicated, as Google uses a sophisticated algorithm.
Here are the factors that Google uses to calculate ad rank:
Cost-per-click (CPC)
This refers to the amount you’re willing to pay each time a user clicks on your ad. In a Google Ads auction, your ad will have a better chance of being shown if you place a higher bid. But it doesn’t mean that Google Ads will automatically give the top place to the highest bidder. It also takes into account the overall quality of your ad campaign.
Cost-per-thousand impressions (CPM)
CPM is more often associated with Google Display Ads. With CPC, you pay every time a user clicks on your ad. Meanwhile, with CPM, you pay for impressions (for instance, how many times your ad is shown) rather than clicks. This is useful for establishing brand awareness or targeting an audience at the top of the sales funnel.
Quality score
This is a crucial metric in Google Ads and acts as your ad’s report card. Google uses this to rate the relevance and usefulness of your ad. Getting a higher quality score means your ad will appear higher in search results, even if your CPC is lower than others. It’s composed of three important components:
- Expected click-through rate (CTR). This component predicts how likely users are to click your ad. It’s based on the historical performance and relevance of your ad.
- Ad relevance. This is how closely your ad copy matches the keywords you’re targeting.
- Landing page experience. You need to remember that Google evaluates the quality of the page where users are taken when they click your ad. A well-optimized landing page that matches your ad’s promise will improve your quality score, while a poor landing page can negatively impact it.
In addition, the ad rank is calculated based on a combination of the maximum bid and the quality score. It’s calculated using this formula: Ad rank = Maximum Bid x Quality Score x Ad Extensions impact.
This means even with a lower budget, a highly relevant and well-crafted ad can outperform competitors who simply spend more money. A high-quality score will not only improve your ad rank but can also lower your overall Google Ads cost.
Types of Google Ads
There are several types of Google Ads that you may encounter when you’re searching for something on a search engine. Each type has its own purpose, strengths, and ideal cases. Here’s a closer look at the most notable ones and their different ad formats:
Search ads
These are the types of ads that appear on the Google search results page when users search for keywords you’ve targeted. These are often text-based and are great for driving traffic to your website.
Display ads
These ads appear across the Google Display Network, including on websites, apps, and blogs. Unlike search ads, these ads are more visual and are ideal for increasing brand awareness.
Video ads
Video ads are ads that are shown on YouTube and other Google properties. These ads are a powerful way to engage with your audience and are also ideal for storytelling and brand promotion.
Setting up your first Google Ads campaign in 5 easy steps
Setting up your first Google Ads campaign might be overwhelming. But don’t worry; with this simple guide, you’ll be able to set up and launch your first campaign quickly and efficiently.
1. Create your Google Ads account
Before you start your ad campaign, create a Google Ads account. To create an account, you can go to the Google Ads platform and click “Start Now,” then follow the prompts to sign up.
During this stage, you’ll need to provide some basic information about your business, such as your business name, website, and billing information.
Once your account is set up, you can start refining your campaign goals. Google Ads will ask you what you want to achieve with your campaign, which will guide the rest of your setup process. You can choose any of the following goals:
- Increased website traffic.
- Boosting sales.
- Generating leads.
- Building brand awareness.
Once you select a goal, Google Ads will automatically adjust your campaign settings and recommend strategies that align with your desired outcomes.
2. Keyword selection
One of the most important elements of a successful Google Ads campaign is the right selection of keywords. This is where you’ll determine which words or phrases you want your ads to show up for when users search on Google Search. The competitiveness of a keyword, or the quantity of other advertisers bidding on it, determines its cost-per-click (CPC).
You can start the keyword selection process by using keyword research tools such as Google Keyword Planner, Semrush, Ahrefs, and Spyfu to identify the most relevant keywords for your business.
These tools will help you explore which keywords are commonly searched for by your potential customers. Additionally, it will give you insights into search volume, competition, and CPC.
To help you select the right keywords, here are some considerations that you need to remember:
- Relevance. Make sure to select keywords that align closely with your business, products, or services.
- Search intent. Put yourself in the shoes of your customers. “What keywords should I use to match the problems they’re trying to solve?” Or “What kind of products are they looking for?”
- Long-tail keywords. These are longer and more specific phrases that often have less competition but can lead to more qualified leads. For example, “buy eco-friendly sneakers online” is a long-tail keyword that targets a specific audience.
- Highly competitive keywords. High-demand or very commercially driven keywords, such as “personal injury lawyer” or “best online insurance,” are typically more costly. Because each click has the potential to yield a significant number of conversions, companies in these sectors are willing to pay more to get clicks.
- Low-competition keywords. Because fewer marketers are bidding on them, less competitive keywords, usually long-tail phrases like “buy eco-friendly yoga mats in California, “are often less expensive. Despite having fewer searches, these keywords have a high potential for conversion and can still generate relevant traffic.
Because of the intense competition and demand for high-demand items like clothing, electronics, and tech gear, Google Shopping Ads shopping campaigns for these products are also more costly. Planning your budget and using targeted techniques are essential if you work in a field where keywords are costly.
Ensure you’re targeting relevant keywords that will drive high-quality traffic and contribute to achieving your campaign goals.
3. Writing ad copy
The next thing you’ll do is craft your ad copy. Your ad copy is the persuasive text used to attract attention, spark interest, and prompt action from users. This helps you stand out in Google Ads and drive more clicks to your website. To make it effective, your ad copy should attract potential customers by conveying your product’s benefits. It should also include a clear call-to-action (CTA).
Here are some tips in writing an effective ad copy:
- Include target keywords.
- It should be clear and concise.
- It should include a strong CTA.
- Consider using ad extensions (additional pieces of information displayed with your ads).
4. Targeting options
One of the key strengths of Google Ads is its ability to target a specific audience. After setting up your ad copy and choosing your keywords, determine your target audience. This is where you can refine who can see your ads, ensuring that you are reaching the right people at the right time.
Here are some of the key targeting options in Google Ads:
- Local targeting. This key targeting option allows your ads to be shown in specific geographic areas, such as countries, cities, or even specific zip codes. This is useful for businesses that operate locally or want to focus on specific regions.
- Language. You can select the languages your target audience speaks, ensuring that your ads are shown to the right demographic.
- Device targeting. Targeting based on device type is valuable, especially since mobile traffic is on the rise. You can target users on desktop computers, mobile phones, or tablets, depending on where your audience is most active.
- Audience targeting. This option allows you to reach specific groups of users based on their behavior, interests, or previous interactions with your business.
5. Budgeting and bidding
After establishing your targeting and ad copy, it’s time to decide on a bidding strategy and set your budget. How much you are willing to spend on your campaign each day depends on your budget.
Google Ads has a few primary bidding options:
- Manual CPC. You manually determine your maximum bid for every click when you use this feature. Although it takes more management, you can have more control over your expenses.
- Enhanced CPC. Using this automatic bidding strategy, Google modifies your CPC bid to assist you in increasing clicks while remaining below your spending limit. For novices who wish to expedite the bidding process, it’s a smart choice.
- Target cost per acquisition (CPA). You can establish a goal cost per conversion with this method if you want to concentrate on conversions. To assist you in achieving that goal, Google will modify your bids.
- Set return on ad spend (ROAS). Modifying bids to get the intended return on ad spend aims to maximize the money you make from your advertisements.
You’ll be well on your way to starting a successful Google Ads campaign if you follow these steps. You’ll position yourself for success with the correct keyword research, focused ad copy, accurate audience targeting, and a successful bidding strategy. You can hone your strategy and explore more sophisticated features like remarketing, conversion tracking, and smart bidding as you have more expertise.
How much are Google Ads?
Several important factors can significantly affect the cost of running Google Ads. Understanding how these factors influence your ad spend will help you budget effectively and optimize your campaigns for the best possible return on investment (ROI).
The following are the main factors that influence your Google Ads budget:
Keywords
Keywords are some of the significant influences on Google Ads cost. The price is affected by the intent behind the keywords and their respective level of competition.
Let’s look at the four types of keyword intent:
Informational
Informational intent keywords are those that are utilized by people who are looking for essential information. At this stage, they’re not looking to purchase. Instead, they just want answers to their queries. These keywords frequently take the form of questions and often start with “what,” “why,” “where,” “when,” and “how.” For instance, the top few Google results for “coffee calories” are blogs about the number of calories found in coffee: “How many calories are in coffee?”
Navigational
Navigational intent keywords are long-tail keywords that search engines like Google identify as parts of queries that are intended to find a particular page. People behind these searches already have some knowledge about the company or product they are searching for. Navigational keywords can be helpful sources of organic traffic when the brand or site is well-known and popular. Some examples are “Facebook login,” “Semrush blog,” or “Where is Starbucks coffee located?”
Commercial
Commercial intent keywords are those that are used by consumers to purchase or look for information to make a purchase. They act as signals from customers or potential customers who indicate their interest in your products or services. They suggest that consumers are willing to shell out money or interested in what you offer. Examples of these keywords are “Buy now,” “sale,” “discount,” or “free shipping.”
Transactional
Transactional intent keywords are those that show the strongest intent to make a purchase, sign up for a service, and take immediate action. Target these keywords with paid ads and highly optimized product pages. Or other landing pages where users can take immediate action on your site. Some examples of these keywords are “buy,” “order,” or “request a quote”.
Location
Another element that affects Google Ads pricing is location. Depending on where you’re targeting, the costs of advertising for local businesses can vary:
- Competitive locations. Because there is more competition for ad placement, cities or regions with a higher concentration of businesses or customers may have higher prices per click.
- Rural or less competitive ideas. On the other hand, because of reduced demand, less populated or less competitive areas could provide more reasonably priced advertising options.
By setting your location targeting correctly, you can ensure that you’re bidding competitively in your region and not overspending to reach users outside your target area.
Tips for managing Google Ads costs
While Google Ads can be quite successful at increasing traffic and conversions, it can become costly. You’ll need to manage your ad spend well to avoid wasting your money.
The following practical advice can help you manage your Google Ads expenses:
Use smart bidding
Smart Bidding is one of the best strategies to control expenses while optimizing your outcomes. This collection of automated bidding techniques aids in optimizing for particular objectives, such as increasing clicks, conversions, or conversion value.
Among the most widely used Smart Bidding techniques are:
- Target CPA. Google will automatically modify your bids to help you reach your goal CPA while maximizing conversions.
- Maximize conversions. This technique automatically adjusts your bids to maximize conversions while staying within your spending limit.
- Target return on Ad Spend. Depending on your desired ROAS, Google modifies your bids to obtain the maximum return.
These strategies are particularly helpful for advertisers who want to simplify their campaigns and delegate the intricacies of bidding to Google’s machine learning, which lowers the risk of overspending while maintaining campaign effectiveness.
Regularly review your ads and keywords
Ad campaign management is a continuous process. To make sure your budget is being used wisely, you’ll need to periodically assess how well your advertising and keywords are doing. The following actions should be taken:
- Pause underperforming ads. To prevent wasting money, pause or modify any advertising or keywords that aren’t working well or are bringing in irrelevant visitors.
- Refine your keyword list. Review your keyword list frequently and eliminate any terms that aren’t performing well or aren’t driving relevant clicks. To stop your advertising from showing up for search terms that aren’t pertinent to your company, you can also include negative keywords.
- Optimize landing pages. Make sure your landing pages are user-friendly, relevant, and optimized for conversion. You can lower your overall ad expenditure by improving your quality score with a well-designed landing page.
You can make sure that your Google Ads budget is being used effectively and efficiently by closely monitoring your campaigns and adjusting on a regular basis based on performance.
Advanced Google Ads features for 2025
AI and automation
Automation is the way of the future for Google Ads, and the AI in Google Ads is getting stronger. You can get better results at a reduced cost with features like smart bidding and performance max campaigns, which employ machine learning to optimize your campaigns in real time.
Remarketing
You can target users who have already interacted with your website or Google Ads by using remarketing. Your chances of making a sale can be increased by using this function to re-engage potential clients who didn’t convert the first time.
Custom audiences
One effective strategy for reaching user groups is to target custom audiences. For instance, you can target individuals according to their demographic data, past surfing activity, or purchasing patterns. Custom audiences aid in the development of more successful and individualized marketing.
Common mistakes to avoid with Google Ads
To ensure the success of your Google Ads campaigns, avoid these common mistakes:
Not tracking conversions
You won’t be able to determine whether your advertisements are producing the desired effects without conversion tracking.
Poorly optimized ad copy
Wasted money can result from ad copy that doesn’t connect with your target demographic. For improved results, test and improve your ad copy frequently.
Overbidding on keywords
Avoid getting sucked into bidding wars. Rather, concentrate on focusing on pertinent keywords that will increase quality traffic without increasing your expenses.
Start your Google Ads campaign today with Web.com
When implemented properly, Google Ads can revolutionize the corporate landscape. You may enhance conversions, create leads, and drive quality visitors by using advanced capabilities like AI and remarketing, as well as by comprehending how the platform functions and properly setting up your campaigns.
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