What is AdWords?

Google Adwords is Google’s own advertising giant. In 2017 alone, it generated $95.38 billion in total revenue, which accounted for 86.9% of Google’s overall revenue. Millions of businesses & individuals use Adwords for one simple reason, it works.

Google's advertising revenue in US Dollars

To get an idea of how you can monetise from using Adwords, Google calculated that for every $1 advertisers spend, they get on average $2 back.

The success of this platform is largely down to the sheer amount of traffic Google receives every day.

People search upwards of 3.5 billion times a day on Google alone. That means there are 3.5 billion instances where someone can be shown an ad.

Because you only pay for a click, and not just someone viewing the ad, Adwords can be extremely cost-effective. For example, if 100 people see the ad, but only 2 people click on it, you will only pay for those 2 people.

How does AdWords work?

Adwords allows you to compete against other advertisers, and bid on the search terms of your choice. For example, if someone is searching for “red shoes”, and you were selling red shoes, you could bid on that term to show up in the search results.

Example of an ad that could appear for the search term "red shoes"

By advertising this way, you don’t run the risk of showing your ads to people who have no interest in your product or service.

This allows you to take the guesswork out of traditional advertising methods. You no longer have to advertise to the masses for little to no return.

Adwords uses an auction system to determine what position your ads show up in. When someone is searching for a term you’ve decided to bid on, Google runs yours and your competitors’ bids through a set of criteria to determine whose ad should show up nearest the top of the page.

Illustration of how top position is determined

First of all, Google will figure out the quality score of your ad. Quality score is a number between 1 and 10 that is calculated through a number of factors, including click-through rate, ad relevance, & landing page relevance.

Google will then multiply your quality score, by your max cost per click, to determine an ad rank. For example, if your max cost per click is £2, and your quality score is 10, then your ad rank will be 20.

Finally, Google will compare your ad rank with the other advertisers bidding on that term, and the person with the highest rank shows up at the top of the results.

This type of system also means that the highest bidder doesn’t automatically win. If someone has a cost per click of £4, but a quality score of only 4, then their ad rank will be 16. This is lower than the example earlier, so even with the higher cost per click, they still won’t show up at the top.

Also, the cost per click won’t necessarily be the amount you spend per click. The most that you’ll actually pay is what’s minimally required to hold your ad position.

Adwords isn’t limited to just Google search results either. Google has partnered with thousands of publishers so that advertisers can show ads on their websites for a share of the profit.

If you want to get started with Adwords, get in touch with our PPC team for a free consultation and to discuss your next campaign in more detail.

Written by Declan Keenan

PPC Assistant