Understanding Google Ads

Google Ads

When a user searches for something on Google, the search engine results page will display both paid advertisements and organic results. Advertisers use Google Ads to bid against each other on keywords, to have their adverts shown on the results page when users search for those keywords.

Google charges advertisers every time their advert is clicked on. The price they charge per click varies, but will never go above a maximum price, which is predetermined by the advertiser (this is called the maximum bid). The advertiser will also set a daily budget, which will determine the maximum amount that Google can charge them per day on advertising. Google distributes the ads throughout the day to meet this budget.

Quality Score

Google assesses each advert, giving it a quality score from 1 to 10.

This quality score is determined by:

• Expected click through rate – calculated by dividing the expected number of clicks by the number of people who will see the ad
• Relevance of each keyword to its ad group – Google wants to maintain a good user experience so will prioritise ads that are relevant to the keywords being searched
• Landing page relevance and quality – high-quality ads improve user experience
• Relevance of ad text – again, Google only wants ads that are related to the keyword being searched

The quality score multiplied by the maximum bid for a keyword then determines the ad rank of an advert. The advert with the highest ad rank will then be shown first on the results page when that keyword is searched.

Example: Orange Vendor

An orange vendor wants to display their ad at the top of the first page on Google when the keyword "oranges" is searched. Many other orange vendors also want their ad to show first. The orange vendors then bid on this keyword. Google then determines each vendor's ad rank, based on their maximum bid and the quality score of their advert. Then, the adverts are displayed on the google results page, ordered by the adverts' ad ranks, with the ad with the highest ad rank being shown first.

Advertisers typically create different ads under many different keywords, aiming to maximise the quality score of each ad in order to minimise the price they have to pay for each click. Also, to maximise returns, they continually manage their advertising campaigns to remove underperforming ads/keywords that are expensive and have a low conversion rate, while trying new adverts and keywords that they think could yield better results.

Example: Ad Rank Comparison

Advert 1 with a maximum bid of £5 and a quality score of 4 will have an ad rank of 20. Meanwhile, advert 2, that has been optimised, might have a maximum bid of only £3 and a quality score of 8, giving it an ad rank of 24. This means that the advertiser is paying less for advert 2 despite it having a better location on the google results page, which will lead to more traffic to their website, ultimately leading to more sales conversions, all with a higher profit margin.

Summary

In summary, Google Ads allows businesses to pay for targeted site traffic, leading to more sales, and if done correctly, increased profits.