How Does Google AdWords Work? - Instapage Guide

How Does Google AdWords Work?

Last updated on May 28, 2017

Did you just finish creating a landing page for your agency’s newest promotion or perhaps you’re putting final touches to your Saas free trial page? Regardless of the type of landing page you’re creating for your business, promoting it is the next marketing step you need to take.

And when it comes to landing page promotion, Google AdWords is one of the most obvious choices. In 2016, Google generated $57.80 billion in total digital ad revenue worldwide, which is an increase of 9% over last year, according to eMarketer:

Google Net Ad Revenues Worldwide 2014-2018

Google AdWords allows you to promote your offers to your target audience via dedicated ads and landing pages.

What is Google AdWords?

Google AdWords is Google’s online advertising program, the program allows you to create online ads to reach audiences that are interested in the products and services you offer. The AdWords platform runs on pay-per-click (PPC) advertising advertising i.e. you have to pay every time a visitor clicks your ad.

Marketers rely on Google AdWords as a promotion platform because it allows them to:

  • Attract more customers by showing ads where people actually go to find information i.e. Google
    Advertise to a local and global audience
  • Reach your target audience at the right time with segmentation and personalization

Think of the Google AdWords platform as an online marketplace, where businesses pay to have their ads ranked at the top of the search results page, or get displayed prominently on other websites.

The Google AdWords network is divided into two categories:

  1. The Search Network: Advertisers place text ads in the search engine results page.
  2. The Display Network: Advertisers place display ads on a vast number of websites across the internet.

We’ll discuss the basics of the two networks separately throughout the guide.

Google AdWords Search Network

When a user types in a search query the first thing they see on the search result page are PPC ads.

The following are the ads Google generated for the search phrase – “time management tools:”

Time Management Tools Search Ads

The ads and the organic search results appear almost similar with the exception of the ‘ad’ tag so as not to cause banner blindness in users:

Google Ads Banner Blindness

How Does Google AdWords Work?

Google AdWords essentially operates on an auction system, when a user types a query in the search engine Google goes through the AdWords advertisers pool and decides whether there should be an auction. If more than one advertiser is bidding on a keyword that Google decides is relevant to the user’s search query, an auction is automatically triggered.

What’s important to note here is that keywords are not really search queries. Referring back to the time management tool example – specific keywords such as ‘time management tools’ may be entered into the auction for a large number of search queries, such as ‘Saas tools for time management’ or ‘Tools to save time’.

What advertisers bid on are keywords and not search queries. They decide how much they want to spend and have the ability to create keywords groups that are then paired with ads and corresponding landing pages.

Google enters the keyword from your account that it deems the most relevant into the auction with the maximum bid you’ve set along with the specific ad, and this is what the user sees.

Where your ad appears on the search results page – the Ad Rank is key to getting more clicks.

What is Ad Rank?

Ad rank determines your ad’s position on Google’s search results page. Ad rank is calculated instantly, as soon as someone does a search that triggers your ad to show up. Google determines Ad Rank based on two key factors, maximum bid and quality score. Here’s an equation to help you remember how ad rank works:

Ad Rank = CPC Bid X Quality Score

Maximum CPC Bid

This is the maximum amount of money you’ve selected to pay every time your ad is clicked, also known as Click Per Cost (CPC). Your ad is more likely to show in front of your competitors if your maximum bid is higher than theirs.

However, just outbidding the competition doesn’t guarantee your ad rank, Google also ranks your ads based on quality score.

Quality Score

Quality score refers to how well an ad group, an ad and a landing page relate to what the user is searching for, and how likely it is that the user will click the ad. The score is calculated on a scale of 1-10.

Three factors determine your quality score:

  1. Expected clickthrough rate (CTR)
  2. Ad relevance
  3. Landing page experience

1. Expected Clickthrough Rate

Here’s how Google defines expected clickthrough rate:

‘A keyword status that measures how likely it is that your ads will get clicked when shown for that keyword, irrespective of your ad’s position, extensions, and other ad formats that may affect the visibility of your ads.’

The expected CTR determines whether your keyword is likely to get a user to click your ads. AdWords essentially takes into account the past performance of keyword based on your ad’s position. Google provides an expected CTR for a keyword of your campaign based on the assumption that the search term will match that keyword exactly.

When a user has typed in the search query and the auction is taking place, Google AdWords calculates a more accurate expected clickthrough rate based on the search term, type of device and other auction factors.

Your expected CTR can have three statuses – average, above average and below average.

An average and above average status signifies that there are no major problems with the keywords’ expected CTR, when compared to all other keywords in the Google AdWords network.

A below average status on the other hand means that you might want to make changes to your ad copy so that it relates more closely to your top keywords.

The expected clickthrough rate is a prediction, the status helps you determine how the keyword performs within your campaign and also across all other advertiser’s accounts. The expected CTR is calculated by not factoring in the ad position, and other factors that affect ad visibility such as ad extensions etc.

An important thing to remember about expected CTR is that it’s different than the clickthrough rate value that you see in your Google AdWords account.

2. Ad Relevance

Ad relevance is a status that measures the message match between your keyword and your ad. For example Google determines if someone searching for a keyword you’ve bid on sees your ad being relevant to the keyword search.

There are three ad relevance statuses – below average, average and above average. You can use the ad relevance status to help identify which keywords aren’t relevant to your ad and make changes accordingly so that your ad has an impact on your audience.

3. Landing Page Experience

Google measures landing page experience by determining how relevant your landing page is to your ad, and how much it relates to the user’s search term. The landing page experience status describes whether the landing page provided a good experience for the visitor who landed on the page after clicking the ad.

Landing pages that are clear and offer relevant information to visitors get a status of average and above average. Pages that don’t offer relevant information, seem untrustworthy or are mobile unresponsive get a status of below average.

To get a high quality score and improve Ad Rank, it is extremely important you take care of keyword, ad and landing page relevance as well as set an appropriate maximum bid for your campaigns.

Google AdWords Display Network

Display ads are the banner ads you see on websites everywhere. For example, here’s Lattice’s banner ad on Forbes’ website:

Lattice Display Ad on Forbes Website

The Google Display Network gives you the opportunity to connect with your customers in a variety of ad formats across the digital landscape. The Display Ad Network includes over two million websites that reach over 90% of people on the internet.

Contrary to the Search Network that is designed to let you reach people that are searching for a specific service/product, the Display Network allows you to catch your visitor’s’ attention earlier in the buying cycle. For example you can promote your Saas free trial to a visitor who’s reading reviews about which tool would be the best to use.

Google uses contextual targeting to match ads to relevant websites in the Display Network. The search network analyzes the content of each webpage and determines its central theme, the theme is then matched to your ad using the keywords you’ve selected, the selected language, the visitors’ recent browsing history and location targeting among other factors.

You can select the types of webpages where you want your ads to appear, you even have the option of blocking your ads from webpages you think aren’t relevant to your business.

The Display Network can be used in your remarketing campaigns, to reach out to visitors who’ve come on your webpage but have left without fulfilling a conversion goal.

You can use different ad formats to engage your audience via the Display Network, such as text, image, video or rich media format ads.

Both the Search and Display Ad Networks allow marketers to create and measure effective paid advertising campaigns that reach their audience and convert them.