How Does AdWords Work? WordStream Demystifies the Google AdWords Bidding Process

BOSTON, MA – November 16, 2011 – WordStream Inc., a provider of search marketing software, today released an infographic that demystifies the Google AdWords bidding process. AdWords, the most popular pay-per-click (PPC) advertising platform, is a complicated system, but it functions very similarly to an auction. WordStream leverages the familiar auction metaphor to make key AdWords concepts clear.

The infographic reveals:

  • What gets entered into each “auction” – Advertisers identify keywords they want to bid on as well as how much they are willing to spend; Google then matches advertising to user search queries.
  • How Google determines which ads are shown where – If your ad is relevant enough to be entered into an auction, Google looks at your maximum bid and your Quality Score to determine your ad rank.
  • How Google determines what advertisers pay – An advertiser’s cost per click (CPC) is determined by the ad rank of the next highest advertiser as well as your Quality Score.

An interesting outcome of Google’s process is that advertisers with high Quality Scores can actually outrank – and pay far less per click – than advertisers that place much higher bids. This is because Google places such a high value on relevance. By delivering more relevant, useful ads, Google ensures that more users click. This makes both search engine users and PPC advertisers happy, and increases Google’s profits from AdWords. (Advertising revenue makes up 97% of Google’s total revenue, accounting for $32.2 billion annually.)

View the full infographic: “How Does the Google AdWords Auction Work?

About WordStream

WordStream Inc. provides search marketing software and PPC services that help marketers get better results from their PPC and SEO efforts. The company's easy-to-use software facilitates more effective paid and organic search campaigns by increasing relevance and Quality Scores in Google AdWords, automating proven best practices, and delivering expert-level results in a fraction of the time. Whether you're new to search marketing or are experienced at PPC management, WordStream's keyword tools, AdWords management tools, and Quality Score optimization tools can help grow your business and drive better results.