Understanding pay-per-click advertising and how it works with Google Ads
Google processes billions of search queries every day and controls more than 87% of search engine market share. As thousands of companies globally have found to their advantage, advertising on Google therefore provides access to the largest consumer base in the world.
Google Ads, formerly known as Google Adwords, is Google’s proprietary online advertising service that allows you to reach target consumers when they are searching for your products or services, or showing interest in them in some way. It’s the most widely-used online advertising tool worldwide, and is typically used to increase awareness, help sell products and services, and to drive traffic to websites.
By placing paid ads on Google, you can increase your business’ visibility–your ads will pop up alongside Google Search results when people search for the products or services you offer. Paid or sponsored ads appear with an ‘Ad’ label, either on top of or below organic results on Google search engine results pages (SERPs).
There are two ways of advertising on Google–the pay-per-click (PPC) model, and Display ads. Display ads appear on the Google Display Network, a network of more than 2 million third-party websites, videos, and applications that have partnered with Google and agreed to display Google ads.
According to Comscore, Display Network sites reach more than 90% of Internet users worldwide. Although it is a vast audience base, Google Ads’ targeting options help ads appear in relevant contexts, such as to relevant and potential customers like ‘young moms’ or ‘businessmen looking for life insurance.’
The PPC model is the most popular and widely used form of paid search advertising. In PPC advertising, advertisers create ads using words or phrases, called ‘keywords,’ to describe their business offerings and target potential customers. When someone searches for products or services similar to what you offer, your ad might become eligible to appear on the SERP.
A third, less popular method of online advertising is the Cost per thousand impressions (CPM) method in which businesses bid for one thousand views on the Google Display Network.
When using PPC advertising, since there’s likely to be more than one business offering products and services in a given industry (that will all therefore choose similar keywords), they bid on keywords by listing the maximum price they are willing to pay for each click on their ad. This is known as a cost-per-click (CPC) bid. You can either manually enter your CPC bid or choose automatic bidding, in which Google sets the bid price for the optimum results within your ad budget.
For each search query, Google Ads performs an auction and determines ads that qualify to appear on the SERP based on the strength of the keyword-matching. Through the auction, Google determines which ads will appear on a SERP, the ad’s positioning (the order in which the ads appear), and the cost.
Ad position is determined by a formula called Ad Rank. According to Google, Ad Rank attaches a quality score to your ad based on the information filled in during the auction (including expected clickthrough rate, ad relevance, and landing page experience), the Ad Rank thresholds, the competitiveness of an auction, the context of the person’s search (for example, the person’s location, device, or time of search), and the expected impact of extensions and other ad formats.
Ad ranks are recalculated for each auction and can fluctuate depending on competition, ad quality, and the context of the search.
For startups with limited market visibility and advertising budgets, Google Ads is an effective and affordable tool to raise brand awareness, reach potential customers and measure the efficacy of ads.
