Google Ads support articles offer valuable information, yet grasping the intricacies of Google Ads can be a bit perplexing. Imagine consulting a highly enthusiastic PPC specialist about the inner workings of the Google Ads auction; they might resemble a genuine auctioneer!
Understanding how Google Ads operates is essential for making informed advertising decisions. In this guide, I'll help you grasp the ins and outs of Google Ads through a straightforward tour, visually appealing graphics, and an FAQ section.
Table of Contents:
1. Does Google Ads Work?
2. How Does Google Ads Work (the TLDR)?
3. A Step-by-Step Guide to the Google Ads Auction
4. The Impressive Google Ads Auction Infographic
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5. Answers to Your Google Ads FAQs
Let's dive into the world of Google Ads, from keywords to expenses, and everything in between.
Firstly, does Google Ads deliver results? While we're in the digital marketing realm, it's worth noting the following facts and statistics:
Google Ads captures high-intent users actively searching for products or services, receiving 65% of clicks for purchasing keywords compared to 35% for organic results.
It's cost-effective, as your ads display when relevant, you can set spending limits, and schedule ads for optimal times. Google Ads can yield an 800% return on investment (ROI), meaning $8 for every $1 spent.
Credibility: Google reigns supreme as the world's most renowned and trusted search engine. No wonder 63% of individuals express their preference for clicking on Google ads over Amazon (15%), YouTube (9%), and Bing (6%) ads.
Precise Evaluation: Armed with valuable data revealing the performance of your ads, you can fine-tune your ad content, bidding strategies, and account organization to make the most of your advertising budget.
Instantaneous Impact: While SEO is essential for long-term business success, it demands time to attain organic rankings. Google Search ads, on the other hand, provide immediate visibility, putting your message in front of your audience right away.
How Does Google Ads Work? (In a Nutshell)
Explaining Google Ads isn't a simple task, which is why we've dedicated an entire post and infographic to it. However, let's get the quick overview before diving into the details:
1. Advertisers create ads targeting specific keywords.
2. Someone searches on Google.
3. If relevant ads match the search, an auction begins.
4. Google enters all eligible ads, one per account.
5. Winners are chosen using Quality Score and Ad Rank.
6. Advertisers only pay when their ad is clicked.
Now, let's delve into the formulas and understand how this translates into an impressive 800% ROI.
How the Google Ads Auction Functions
Understanding the Google Ads auction is essential for both consumers and advertisers. Consumers can grasp why they see certain ads, while advertisers can appreciate the significance of managing their accounts. Here's a comprehensive breakdown of the Google Ads auction, focusing on Search ads (Shopping and Display details in the FAQs):
1. Advertisers Craft Ads Based on Keywords
In the Google Ads auction, advertisers bid on keywords rather than tangible products. For instance, a pet adoption agency might create an ad targeting keywords like "pet finder," "pet adoption," "pet rescue," "animal shelter," and more. They also specify their maximum bid—the most they're willing to pay for a click on their ad (we'll cover this in more detail later).
The ads you see, along with the keywords they're linked to, form the collective group of advertisers participating in the Google Ads auction.
2. When a user searches on Google
This action is referred to as a "query." For the purpose of this post, it's important to note that queries and keywords are essentially interchangeable. The distinction lies in the fact that keywords are what advertisers aim for, while queries are the actual terms entered by users in their search.
At times, the user's query precisely matches the chosen keyword, while in other cases, it's a close match. Now, let's move on to the next phase.
3. Google Initiates the Search
This process is known as "keyword matching." Google goes through the group of advertisers mentioned earlier to check if any of them are bidding on keywords that Google considers relevant to the user's query.
In some cases, like when people are conducting informational searches, there might not be any closely related keywords available among the advertisers. However, in many instances, especially considering that there are around 3 billion out of 5.6 billion daily searches with relevant keywords, there are indeed keywords at play. (By the way, there are three distinct match types for keywords, which we'll delve into in our FAQs).
Here's a simple example: Suppose someone searches for "pet adoption." Google could identify keywords like "pet adoption," "rescue shelter," "pet finder," and "buy a dog" (among potentially hundreds or even thousands of others) as highly relevant to the user's query and location. So, with these keywords in the mix...
4. The Auction Takes Off!
What this means is that, for each account bidding on one or more pertinent keywords related to the query, Google selects one keyword per account to participate in the auction, along with that account's corresponding ad for that specific keyword. Does that make sense?
Considering there are over four million Google advertisers, it's important to understand that a single ad auction can involve thousands of ads. However, there are only a limited number of spots on the Search Engine Results Page (SERP) where Google ads can appear—typically three or four at the top and bottom.
So, how does Google determine which ads get displayed?
How does Google select which ad to present?
The beauty of the Google Ads auction lies in the fact that being the highest bidder doesn't guarantee victory. Google evaluates various factors to choose the most relevant and top-quality ad for each user. This is especially beneficial for small businesses utilizing Google Ads. Here's how Google makes its decision:
Step 1: Quality Score
Initially, Google assigns a Quality Score to each ad, ranging from 1 to 10. This score depends on three key elements:
1. Relevance: How well your ad aligns with the user's search intent.
2. Expected click-through rate: The likelihood of your ad being clicked based on your historical performance compared to competitors.
3. User experience: The relevance of your landing page to your ad and how user-friendly the overall experience is.
Step 2: Ad Ranking
Following the determination of each ad's Quality Score, Google calculates its Ad Rank using this formula:
Ad Rank = Quality Score X Maximum Bid
The term "Rank" in Ad Rank can be a bit misleading since we often associate a higher rank with being better. However, in this context, the higher your Ad Rank, the more favorable it is. There's no fixed perfect Ad Rank because it varies based on the keyword's cost.
To illustrate, consider this example: Sam boasts a Quality Score of 10 and a maximum bid of $2, resulting in an Ad Rank of 10 x 2 = 20. In contrast, Jane has a higher maximum bid, but her Quality Score is just 1, so her Ad Rank is 8. Unfortunately, Jane's ad doesn't make it onto the SERP. (It might be time for Jane to work on improving that Quality Score!)pic
Step 3: Cost per Click
In the final phase of the auction, the price comes into play. Advertisers are charged only when someone clicks on their ad, hence the term "pay-per-click" (PPC). However, this isn't a fixed, uniform cost, and it may not match the advertiser's maximum bid.
Here's how it's calculated: Your cost per click equals the Ad Rank of the advertiser below you divided by your Quality Score, plus $0.01.
In this example, Sam holds the top spot. His Quality Score is 10, and his Ad Rank stands at 20. Right below Sam, Mary's ad has an Ad Rank of 16. Consequently, Sam's actual cost per click is calculated as 16 divided by 10, plus $0.01, which equals $1.61.
Now, consider Pat. Pat has a Quality Score of 2, an Ad Rank of 12, and pays $4.01 per click. Despite Pat's higher bid and cost per click, he appears two positions below Sam.
It's evident that the maximum bid plays a role in the auction (as it influences Quality Score, which, in turn, affects Ad Rank), but it's not the sole determining factor. Google places emphasis on higher-quality ads, ultimately leading to lower costs per click.
This dynamic is what makes the return on investment (ROI) for Google Ads so appealing: Searchers encounter only ads that match their search intent (those they're likely to click on), and advertisers pay the most favorable price for each query. It's a win-win situation!
Curious about the complete workings of Google Ads? We've condensed it all into one comprehensive, visually engaging, and might we add, exceptionally attractive infographic.
More FAQs on How Google Ads Operate
Here are some commonly asked questions that provide further insights into how Google Ads function:
1. What is a keyword?
Keywords are the words and phrases entered into search engines by individuals interested in your offerings. For instance, if you're promoting your pet adoption agency, your keywords might include "pet finder," "pet adoption," and "dog rescue."
2. How many keywords should I target per ad group?
Google suggests no more than 30 keywords per ad group, but we recommend sticking to around 20. In an ideal Google Ads account setup, you have campaigns (e.g., Search, Display), ad groups within those campaigns (typically 7-10 per campaign), and within each ad group, you have ads and keywords. An optimal ad group comprises 2-3 ads (all directing to the same landing page) and no more than 20 keywords.
3. How do I choose which keywords to bid on?
The best approach is to use a keyword research tool. It will provide insights into how often a keyword is searched each month, its average cost per click, and its competitiveness. You can utilize our Free Keyword Tool or explore our list of keyword research tools. Also, don't forget to check out our guide on keyword research!
4. What's the difference between a keyword and a query?
Both refer to terms used in a search engine. Keywords are the terms advertisers target, while queries are the actual terms users type in. Sometimes they match exactly, other times they are relevant.
5. What is a maximum bid?
It represents the highest amount you're willing to pay for a click on your ad. Google multiplies your Quality Score by your maximum bid to determine your Ad Rank, which influences whether your ad appears on the SERP.
6. How does maximum bid work with automated bidding strategies?
Excellent question! In our previous example, we assumed manual CPC bidding. However, with various automated bidding strategies, it works differently. For instance:
For CPM bidding: Google uses eCPM technology to determine bids in auctions with both CPM and CPC bids.
For CPA bidding: Google determines max CPC bids based on historical conversion data to meet your CPA or conversion value target.
7. Does the Google Ads auction run for every search?
No, it depends on search intent. For informational searches (e.g., "how to take care of a pet" or "how to start a pet adoption agency"), ads are less likely to appear. However, for transactional and commercial intent keywords (e.g., "buy tennis rackets online"), you'll consistently see ads.
Let's explore how match types function in Google Ads. When you pick keywords to focus on in your ads, you'll need to choose a match type, and Google Ads offers three options:
1. Broad Match: With broad match, your ad may appear for searches that contain or relate to your chosen keyword.
2. Phrase Match: Opting for phrase match means your ad can be displayed for searches that convey the intended meaning of your keyword.
3. Exact Match: If you choose exact match, your ad could show up for searches that precisely match the meaning of your keyword.
What's Considered a Strong Quality Score?
Google Ads Quality Score spans from 1 to 10, but aiming for a perfect 10 isn't always necessary. In reality, many advertisers discover that their most effective ads maintain "lower" Quality Scores. This doesn't mean Quality Score is unimportant—it's an essential factor in ad ranking. However, what constitutes a good Quality Score varies based on the type of keyword. Here's a guideline to aim for:
- Branded keywords: 8-10
- High-intent commercial keywords: 7-9
- Low-intent keywords: 7
- Competitor keywords: 3+
What Constitutes a Strong Ad Rank?
Unlike Quality Score, Google Ads Ad Rank doesn't have a fixed range. This is because Ad Rank is determined by multiplying Quality Score by the maximum bid, and the maximum bid depends on estimated cost per click and keyword competition. The key takeaway for Ad Rank is that a higher Ad Rank results in a higher ad position on the SERP, and you can enhance your Ad Rank by improving your Quality Score.
What's a Competitive Cost per Click in Google Ads?
The answer hinges on your industry, as competitiveness varies. According to our paid search benchmarks, the average cost per click in Google Ads across all industries stands at $3.53, ranging from $1.40 (real estate) to $8.67 (legal services).
How Much Does Google Ads Cost?
The cost varies based on your industry, target audience, budget, and how well your account is optimized. To get an estimate of your monthly spending, check out our detailed guide on Google Ads costs.
How Does Google Ads Billing Function?
Google Ads offers three payment options:
1.Automatic Payment: You're charged automatically after your ads run, either when you reach a specific threshold or on a 30-day cycle.
2. Manual Payment: Pay in advance, and your ads will pause once your prepaid amount is used.
3.Monthly Invoicing: This option is available if you qualify for a Google credit line.
How Quickly Does Google Ads Generate Results?
Once your ad is live, Google typically reviews it within 24-28 hours.
How Do Google Shopping Ads Operate?
With Google Shopping, you don't bid on keywords. Instead, you optimize your product feed and utilize negative keywords and priority settings to manage your ad expenses and delivery effectively.
How Does the Google Ads Auction Function for Display Ads?
The display ad auction operates similarly but is triggered by "placements." These are pages on Google AdSense where website or app publishers offer advertising space to Google Ads advertisers.
