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Google Ads: What Is It, How It Works and What Are Its Benefits?

If you’re planning on spending any amount of money on ads to reach your target audience, you’d better spend it in the right place.

Somewhere where online ads increase brand awareness by 80%. Somewhere where 90% of consumers say ads influence their purchase decisions and somewhere where 43% of users purchased something after seeing an online ad.

Somewhere like Google.

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.

So the question now is, is Google Ads the best ad network for your business?

In this in-depth guide, I’ll explain what Google ads are, how Google ads work, and why you should use Google ads for your business.

Let’s crack on!

What is Google Ads?

Google Ads (formerly known as Google AdWords) is Google’s advertising system in which advertisers bid on certain keywords in order for their clickable ads to appear in Google’s search results.

Google Ads falls under a marketing channel known as pay-per-click (PPC), where the advertiser pays per click or per impression (CPM) on an ad.

Google Ads is an effective way to drive qualified traffic, or good-fit customers, to your business while they’re searching for products and services like the ones you offer.

With Google Ads, you can boost your website traffic, receive more phone calls, and increase your in-store visits.

Below is an example of a Google search engine results page (SERP). The sponsored results, or ads, are denoted with an “Ad” label.

Additionally, no matter the size of your business, you can tailor your ads to suit your budget. The Google Ads tool gives you the opportunity to stay within your monthly cap and stop your ad spending at any point in time.

For many businesses advertising on Google has become necessary to stay competitive rather than just a way to increase revenue and reach.

10 Google Ads Terms You Must Know

While Google Ads remains one of the most popular and effective forms of online advertising, the vast amount of moving parts required combined with Google’s frequent changes to their platform are enough to make anyone’s head spin.

These common terms will help you set up, manage, and optimize your Google Ads. Some of these are specific to Google Ads, while others are related to Pay-per-click in general.

Either way, you’ll need to know these to run an effective ad campaign.

1. AdRank

Your AdRank determines your ad placement. The higher the value, the better you’ll rank, the more eyes will fall on your ad, and the higher the probability that users will click your ad.

Your AdRank is determined by your maximum bid multiplied by your Quality Score.

2. Conversions

A conversion within Google ads happens when a user performs a specific action after clicking on one of your ads.

While actions like page views and page scrolls can be counted as conversions, these are considered micro conversions and are much less indicative of your account’s true success.

Instead, focus on macro conversions that measure more tangible actions like product purchases, document downloads, or lead form fills.

3. Bidding

Google Ads is based on a bidding system, where you as the advertiser select a maximum bid amount you’re willing to pay for a click on your ad.

The higher your bid, the better your placement. You have three options for bidding: cost-per-click (CPC), cost per mille (CPM), or cost per engagement (CPE).

4. Quality Score

Your Quality Score is essentially Google’s way of grading your ads to determine how they should rank on the search engine.

The higher your rank, the higher your ad placement will be; while low Quality Score leads to fewer impressions and fewer chances to gain conversions.

5. Click-Through Rate

Click-through rate (CTR) is a vital metric to the success of your PPC campaign and measures the rate at which users click your ads compared to the number of times the ad is viewed.

CTR is calculated by dividing the number of people who click your ad by the number of people who viewed your ad–so the higher your CTR, the better.

6. Conversion Rate

Conversion Rate (CVR) is a measure of form submissions as a proportion of total visits to your landing page. Simplistically speaking, a high CVR means that your landing page presents a seamless user experience that matches the promise of the ad.

7. Impressions

Impressions represent the number of times your ad is shown on a search result page or within the Google Network; each time your ad is shown, it is counted as one impression, regardless of whether someone clicks on it or not.

8. Display Network

The Google Display Network is a network of websites that allow Google Ads to be featured on their webpages; these can be text or image ads, and are shown on the same page as content that is relevant to your keywords.

9. Ad Extensions

In traditional print advertising, the bigger the ad, the bigger the spend. But what if you could double the size of your ad without paying any extra money?

By using Ad Extensions, you can provide additional valuable information and increase the footprint of your ad on Google’s results pages.

10. Pay-Per-Click

Pay-per-click is a type of advertising where the advertiser pays per click on an ad. PPC is not specific to Google Ads, but it is the most common type of paid campaign.

It’s important to understand the ins and outs of PPC before launching your first Google Ads campaign.

Types of Google Ads Campaigns

You can choose from five different types of ad campaigns with Google Ads. Let’s take a look at each one of them individually.

1. Search Ad Campaigns

Examples of Search Ads

Search ads are text ads that are displayed on Google results pages. With search ads, you can display your ad in the place where most searchers look for information first — on Google.

And Google shows your ad in the same format as other results (except for denoting it as an “Ad”) so users are accustomed to seeing and clicking on results.

2. Display Ad Campaigns

An Example of Display Ad

Google has a network of websites in various industries and with an array of audiences that opt in to display Google Ads, known as the Google Display Network.

The benefit to the website owner is that they’re paid per click or impression on the ads. The benefit to advertisers is that they can get their content in front of audiences that are aligned with their personas.

3. Video Ad Campaigns

An Example of Video Ad

Video ads are displayed before or after (and sometimes in the middle of) YouTube videos. Remember, YouTube is a search engine, too.

The right keywords will place you in front of a video, disrupting the user’s behaviour just enough to grab their attention.

4. App Ad Campaigns

An Example of App Ad

Google App Campaigns promote your mobile application through an ad displayed on Google Search Network, YouTube, Google Play, Google Display Network, and more.

You can run ads that encourage your audience to install your app or, if they already use it, to take certain actions within your app.

Unlike other ad types, you don’t design an App ad campaign. Instead, provide Google with your app’s information and audience, and place a bid. Google does the rest to get your app in front of the right eyes.

5. Shopping Ad Campaigns

Examples of Shopping Ads

Another type of Google Ad is Google Shopping Ad Campaigns. Shopping campaigns, like these other types of ads, are displayed on SERPs and include detailed product information such as price and product imagery.

You can run a Shopping campaign through Google Merchant Center, where you input specific product information that Google pulls from to create your shopping ads.

Instead of marketing your brand as a whole, Shopping Ads allow you to promote specific products and product lines. That’s why, when you search for a particular product on Google, you’ll see ads for different brands pop up along the top and/or side.

How does Google Ads work?

To put it simply in Google Ads, advertisers bid on keywords to have a chance to place their ads on search results pages or other websites.

An ad auction happens whenever a user searches anything on Google Search or visits a website in the broader network.

At every auction, Google calculates an Ad Rank for every ad in the auction, which determines if the users see your ads in the first place.

There are currently six factors that define an Ad Rank:

  • Your max bid
  • Ad quality and landing page experience
  • Ad rank has to be higher than the thresholds
  • Competitiveness
  • User search context (For example, device, location, time of day, and search intent)
  • Expected impact of ad formats and extensions

Then your ads may appear on top search results if your Ad Rank is high enough. There are currently four available ad slots on top of the results. And more ad slots are available at the bottom of the search results pages.

One key component of getting ads to rank higher is to optimize ad quality. You can monitor a metric called Quality Score, a combination of ad quality metrics from past performance.

Quality Scores is on a scale from 1 to 10, and it determines how relevant your ads are. Google doesn’t use Quality Scores themselves in an active ad auction, which is vital to understand. But it instead helps you optimize your overall ad quality.

How Does The Google Ads Auction Works?

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

To win the Google Ads auctions and see your Google advertisement appear for relevant keywords, you’ll need to optimize your Quality Score and the bid amount.

The higher your Quality Score, in conjunction with your bid amount, the better your ad positioning. The following factors 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. This enables you to get more clicks and conversions without having to raise your bids.

Why You Should Use Google Ads To Grow Your Business?

Let’s look at some of the core benefits and the main reasons why companies should use Google Ads as part of their online strategy:

  • Costs and ROI
  • High-level Of Control And Management
  • Fast Results
  • Level Competition
  • Local Advertising
  • Increases Brand Awareness
  • Targeting
  • Remarketing
  • Analytics
  • Conversion Tracking and Optimization
  • Benefits for SEO And Content Marketing
  • For Scaling Profitably

How to Use and Create Google Ads?

It’s not difficult to get started with Google Ads, but it can be a little overwhelming. That’s why I’m going to walk you through 7 steps to set up a campaign even if it’s your first time logging into Google Ads.

1. Go to the Google Ads Website

Go to the Google Ads website and look for “Start Now.” Click on that and sign up for your Google Ads account. You can then click on the button that says, “Create your first campaign.”

2. Choose a Campaign Type and Name

You have options for a campaign type. When you’re just getting started, it’s best to choose “Search Network only.”

Name your campaign. You may want to choose a name that has to do with the product or service you’re advertising.

3. Select Ad Display Location

You have many options when it comes to people’s locations. You can choose a large or small area. For instance, an entire country or just a city. If you want a specific area, you can use latitude-longitude coordinates.

Be sure you know the locations of your ideal customer. If you’re a local business owner, you want to target people around your area.

For business owners who sell internationally, you may want to set up several campaigns for countries that have the highest sales or where most of your consumers live.

4. Set Your Daily Budget

Until you become a proficient Google Ads user, it’s best to set a low daily budget. This allows you to start slowly, gather data, and then expand what’s working once you are more familiar with your campaigns.

You must also set up your payment options:

  • Manual Payments: You pay before your ad shows.
  • Automatic Payments: You link your account to your credit card or bank account and the money is drafted automatically.
  • Monthly Invoicing: Google provides credit lines to some business owners who qualify.

5. Add Keywords

This can be tricky, especially for first time advertisers. Your first inclination is likely to add as many keywords as possible that you think are relevant for your business. In fact, this is exactly what Google wants you to do because then you’ll spend more money.

Fight that urge! Instead, focus only on what I call the “bullseye” keywords. These are the keywords where there is absolutely no doubt that the person searching the keyword is looking for exactly what you offer.

6. Create an Ad

This is when the fun begins. You get to create ads that will attract your customers and make them click to go to your site. Prospects are more likely to click on an ad that has the keyword they used in Google’s search bar.

So, if you are targeting a specific keyword phrase your consumers use, be sure to use that phrase in one of the two headlines.

After the headlines, you can move on to the ad description. Focus on the key benefits of your product or service, describe your special offer if you have one, and end with a strong call to action.

7. Set Up Conversion Tracking

This last step is to set up all the appropriate conversion tracking for your business. Google gives you the following options:

  • Webform leads (ex. quote requests)
  • E-commerce orders (ex. orders from your online shopping cart)
  • Calls from ads (ex. phone calls from the number displayed on your ads)
  • Calls from the website (ex. phone calls from the number displayed on your website)
  • Imports from sales that occur off of the internet

Make sure you set up all the appropriate conversion tracking options before you turn your ads on! Otherwise, you won’t be able to measure the effectiveness of your ads.

Tracking, Adjusting and Conquering Effective Campaigns

As your ads run, keep an eye on the analytics. You’ll be able to see what is working and what isn’t working. As you pay attention to what your ads do, you’ll be able to get closer to what will give you the best results.

When you’ve figured out which ads your consumers click on the most, you can create similar ones for higher cost-per-click keywords. This will help you increase your ROI.

Once you’ve set up your ad campaigns and have tracking in place, it’s time to start bidding. Remember, your ability to rank in Google Ads depends on how you bid.

While your bid amount will depend on your budget and goals, there are a few strategies and bid settings you should be aware of when launching your paid campaign.

Automated vs. Manual Bidding

You have two options when it comes to bidding on your keywords — automated and manual. Here’s how they work:

  • Automated Bidding: Automated bidding puts Google in the driver’s seat and allows the platform to adjust your bid based on your competitors. You can still set a maximum budget, and Google will work within a range to give you the best chance at winning the bid within those constraints.
  • Manual Bidding: Manual bidding let’s you set the bid amounts for your ad groups and keywords, giving you the chance to reduce spending on low-performing ads.

Bidding on Branded Search Terms

Branded terms are those with your company or unique product name in them, like “Saucerful of Ideas SEO guide.”

There is much debate on whether to bid on your branded terms or not. On one side of the debate, bidding on terms that will likely yield organic results could be seen as a waste of money.

Cost Per Acquisition (CPA)

If the idea of spending money to convert prospects into leads makes you uneasy, then you can set a CPA instead and only pay when a user converts into a customer.

While this bidding strategy could cost more, you can take comfort in knowing that you only pay when you acquire a paying customer. This strategy makes it easy to track and justify your ad spend.


Today, a strong presence in Google is crucial for every business type, ranging from a local service to an international conglomerate. And using Google Ads benefits all kinds of businesses to achieve their online goals.

With its reach and authority amongst other search engines, Google Ads is one of the most powerful advertising tools a business can use.

From search campaigns to shopping ads, there are so many ways to create the best campaign for your business and its audiences.

By taking advantage of all of the features Google Ads has to offer, there is no question that you can develop a successful marketing campaign for your business.

Get started and sell like crazy. Good luck!

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