What Is Google AdWords? How the AdWords Auction Works
- Download the How AdWords Works infographic as a PDF
- Grade Your AdWords Account for Free: Use the AdWords Grader to get a free, instant AdWords account audit.
This Infographic is Property of WordStream, Inc.
What is Google AdWords
What is AdWords? 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. This infographic will help you understand how AdWords works, detailing the AdWords auction, bidding process and explaining important factors like Quality Score and cost-per-click. If you're asking "How does AdWords Work?" this infographic is for you!
Does AdWords Work?
Does Google AdWords work? Depending on the competitiveness of the keywords you're bidding for and the relevancy of that keyword to real conversions for your company, AdWords may or may not work for your business. For the most part, we've found that Google AdWords is extremely effective for many kinds of businesses, as long as they don't waste their money on the wrong keywords, or write weak, low CTR ads.
How to advertise with Google AdWords
How does AdWords bidding work?
The actual position of your ad is determined by your ad rank (Maximum Bid times Quality Score). The highest ad rank gets the 1st ad position. Your actual CPC will be determined by the ad rank of the next highest ad below you divided by your Quality Score. The only exception of this rule is when you are the only bidder or the lowest bid in the AdWords auction; then you pay your maximum bid per click! AdWords bidding heavily penalizes advertisers who bid with low quality scores. Conversely, those with high Quality Scores get higher ad ranks and lower CPC.
How many times does a Google auction run?
The auction gets run billions of times each month. The results are such that users find ads that are relevant to what they're looking for, advertisers connect with potential customers at the lowest possible prices and Google rakes in billions of dollars in revenue.
How does the Google auction work?
Once a query is made on Google, the search engine processes the request and runs the auction which will then determine the ad positions and each advertiser's CPC.
How do you enter a Google auction?
Your ads are eligible to be entered into an auction whenever you're bidding on keywords relevant to the user's search query. Your bids, Quality Score, and relevance will come into play in determining whether your ad qualifies to display on the SERP.
What gets entered into a Google auction?
Once advertisers identity keywords they want to bid on, Google then enters the keyword from your account that it deems most relevant into the auction with the maximum bid you've specified as well as the associated ad.
What is CPC?
CPC, or cost per click, is the amount an advertiser pays each time someone clicks on their AdWords ad.
How does CPC work?
Your CPC is determined by the competitiveness of your keywords, your maximum bids, and your Quality Scores. Learn the most expensive keywords in Google AdWords.
What is average cost per click?
The average amount you spend each time a searcher click on your advertisement.
What is Google Quality Score?
This is a metric Google uses to determine how relevant and useful your ad is to the user, based primarily on your ad's CTR, keyword relevance, and the quality of your landing page. The higher your Quality Score, the better: high Quality Score keywords will save you money and earn you better ad rankings.
How does Google determine what you pay?
The price paid by the advertiser is determined by the amount of clicks that the company's advertisement receives.
What is Google ad rank?
Google ad rank is the position of the company's advertisement on the search engine page based on a combination of the company's maximum bid and quality score.
Ad rank vs. Quality score
The ad rank is more significant to an advertiser because it determines the how high on the page the advertisement will be displayed. Quality score on the other hand is determined by the relevance and usefulness to the searcher and is only a portion of the advertisement positioning process.As of 2013, Google's Quality score has become more and more valuable as the average quality score has changed from a 7 to 5.
Quality score vs. CPC
Quality score and CPC are important because they collective determine the positioning of the advertisement on the search engine results page.
What is ad position in AdWords?
Ad position is the position on the search engine page results where the advertisement appears in relation to all of the other advertisements.
What is Actual CPC?
Actual CPC is the amount an advertiser pays each time a searcher clicks on their advertisement; this number varies depending on the other advertisers in the auction and is always lower than the maximum bidding price.
How does AdWords calculate Actual CPC
Actual CPC is determined by dividing the ad rank of the competitor below them (ad rank to hit) by quality score plus $.01.
What are alternative bidding methods?
What is CPM bidding?
CPM bidding is based on impressions and can be used alongside CPC bidding.
CPC vs. CPM
CPC is the cost for an advertisement based on how many clicks it receives whereas CPM is the cost for an advertisement based on how many impressions it picks up. Both methods can be used simultaneously.
What are AdWords keywords?
Keywords in AdWords are the words and phrases that advertisers bid on, in hopes that their advertisements will appear on the search engine results page (SERP) when people are searching for those products or services. For example, if you sell shoes online, you might bid on keywords like "Nike sneakers" and "penny loafers." Keyword research is the process of using tools and data to determine which keywords are most likely to drive relevant traffic to your ads and your site.
What is search engine optimization?
Search engine optimization is the act of improving the visibility of your site or page within a search engine results page through organic methods. This can be done by using search keywords within your content so that a search engine can find and display your site faster and with more accuracy. Site authority and your link profile also play a role in your search engine rankings.
How does the Google display network work?
The Google Display Network or GDN is a very large network of sites that allow Google to place display advertisements, which reach over 90% of all Internet users! Advertisers generally find that Display Network clicks are less costly than those on the search network. And depending on your targeting methods, the CTR's can be high and the CPA's low.
What is an ad group in Google AdWords? How do ad groups work?
An ad group is a container for your advertisements, keywords, and landing pages. Google tends to reward advertisers who create AdWords campaigns with tightly structured ad groups. It's important not to dump all your keywords into the same ad group, but to organize your keywords into themes.
What is ad relevance in AdWords?
Ad relevance is a measure of how related the keyword you're bidding on is to your advertisements as well as how much your keywords match the message of your ads and landing pages. Higher ad and keyword relevance can improve your click-through rates and Quality Scores.
How does Conversion Optimizer work?
Conversion Optimizer in Google AdWords is a bid manipulation tool that manages bids at the keyword-level with the goal of trying to drive as many conversions at or below an advertiser-specified cost per conversion (also known as Cost per Action, or CPA).
I advertise on Google. How am I doing?
At WordStream, we've analyzed tens of thousands of Google AdWords accounts from all over the world, in all sorts of industries. The easiest way to see how you're doing at Google PPC is to benchmark your PPC performance against similar advertisers in your industry and spend range. Thankfully, WordStream's got a free tool for that. Click below to give our Google AdWords Grader a free run!