What Is Google AdWords & How Does It Work?

No matter if you’re a consultant, freelancer or business owner, everybody is looking to increase their clients and sales. With the growth of the internet and technology over the past decade, one of the ways to do this is with help from an online phenomenon known as Google AdWords.

Although Google AdWords is currently the largest online paid search network, there are still millions of businesses and professionals who have never used it. Not only are they missing out on millions of potential clients and sales, but they’re also giving their competitors an advantage.

If you’ve never heard of Google AdWords, then quite frankly you’re missing out.

To change that, we’re giving you a complete overview of Google AdWords and how it works. Hopefully, after reading this, you’ll see why it’s the most popular paid search network in the world and how it can help you multiply your sales and leads almost overnight.

To bring you up to speed, let’s take some baby steps and explore what Google AdWords is, and how it came to be.

What Is Google AdWords?

google adwords example

Launched in the year 2000, shortly after the launch of Google itself, Google AdWords (which is also now known as Google Ads) is Google’s way of monetizing their highly popular search engine.

Currently, Google is the most popular website in the world with an Alexa ranking of number 1, and over 42 billion impressions per month. If you want the world to know about your company or business, then Google AdWords is the place to advertise.

Just think about how many potential customers and clients you could reach if you had an advert on the first page of Google. Well with Google Ads, that dream can easily become a reality.

Known as a pay per click (or PPC) network, advertisers pay Google to deliver their ads to users who are interested in their products or services. This is done by using their unique filtering options which target users based on the keywords they search for, their country and device type.

Even if you’ve never actually used Google AdWords or ran a paid search campaign in your life, the chances are you’ve interacted with AdWords in the past. Just by typing any popular keyword into Google you’ll instantly be greeted with a collection of paid ads all fighting for your clicks. Here’s an example of what Google ads look like in the search engine:

Example of Google Ads

The highlighted pink area shows the ads in the search results which are being displayed for the given keyword, which in this case is the keyword “insurance”. If you look close enough, you can see the top results actually have a small ad icon next to them on the left to indicate they are in fact, ads. As you start to scroll down the page, the ads suddenly stop and other search results start being shown. Known as organic search results, these are not paid for and therefore don’t get priority at the top.

Each keyword on Google can have a range of ads ranging from zero all the way up to 7 per page. This is all down to how popular the keyword is, and how many people are bidding on it. Fewer bids usually mean fewer ads, while the more competitive terms will be overflowing with them that you’ll actually see them on several results pages.

When you click one of these ads you’ll be redirected over to the advertiser’s website. Once this happens, Google AdWords has successfully done its job by sending over a visitor. Google gets paid for their service, and the user hopefully goes on to buy something from the advertiser.

This simple overview should give you a basic understanding of what Google AdWords is, and a glimpse into how valuable it is. Imagine bidding on hundreds of keywords and bringing in thousands of clicks to your business, you’re almost guaranteed to increase your sales!

How Does Google AdWords Work?

google adwords network

Now we’re all on the same page about what Google AdWords is; we can now dive a little deeper into the inner workings of how it all works. If you want to attract more users to your site, then you should at least have a basic understanding of what’s going on behind the scenes.

Although there are many essential things you should understand when it comes to AdWords, one of the most important has to be the bidding system. Without understanding how that works, you won’t be able to estimate how much a campaign will cost or how much you’ll end up paying per click.

Like we mentioned earlier, advertisers are continually bidding against one another to decide who gets the number one spot. Usually, for most keywords, there are 4 spots available at the top of the page and another 3 at the bottom. Considering 75% of users never venture beyond the first page of Google, these first-page ad spots are always in high demand for advertisers.

If advertiser A is bidding $5 a click while advertiser B is bidding $4 a click, assuming they are the highest bidders, advertiser A will take the number 1 spot while advertiser B will take the 2nd spot. This might not sound like much of a big deal, but if you take a look at the average click through rates based on the ad positions below, you’ll understand why being number 1 is so valuable.

Ad Position Click Through Rate
1 7.94%
2 5.00%
3 2.47%
4 1.96%
5 0.90%
6 0.81%
7 0.91%
8 0.74%
9 0.75%
10 0.20%

Source: Accuracast.com

As you can see, on average the number 1 spot receives almost 8% of clicks for a given keyword. Compare this to the number 2 spot, and it’s nearly 3% higher. Going back to our keyword example we looked at earlier, that keyword alone gets roughly 74,000 searches a month.

Based on that number of searches, here are the clicks that the top 5 ads would receive:

Ad Position Number of Clicks
1 5,876
2 3,700
3 1,828
4 1,450
5 666

Compared to position 2, the first ad spot receives a lot more visitors, 2176 more clicks to be precise. If you’re an advertiser bidding on this keyword, then being in the number 1 spot can have a significant difference on your campaign.

If you can’t afford to bid enough to reach the number 1 spot, then don’t worry. The top 4 positions will bring in considerable clicks which should be enough to decide if you want to scale your campaign or not.

But how do you find out the average cost per click for a keyword?

A quick trick is to use UberSuggest to get a rough estimate of how much the cost per click is on a keyword. There’s an even more accurate way on how to get a figure which we’ll cover below, but for now, getting a quick estimate is always helpful.

By having an idea of how much the average cost per click is, you should be able to work out if that keyword will offer you a return on investment or not. If the average CPC is $5 per click and you assume a relatively low conversion rate of 10%, then you need to make more than $50 a sale in order to make a profit. Of course, that excludes any production costs and other fee’s, but it gives you a good idea if a keyword is too expensive to run a profitable campaign or not.

How to Use Google AdWords

adwords overview

By now you should have a good understanding of what Google AdWords is and how advertisers bid against each other to claim the number one spot. Spending time learning about AdWords is great, but unless you take action, you’ll never reap the benefits of PPC ads.

To give you an up to date overview of how to get started in Google AdWords, here’s an in-depth tutorial on how to set up AdWords and launch your first campaign. Not only does this cover the new AdWords interface from scratch, but it also teaches you basic keyword research and what keywords you should be targeting.

Don’t Fall Victim to Ad Fraud

If you’re new to AdWords, it can be a very daunting experience setting up your campaign and spending lots of money on clicks that might not convert. To increase your chances of having a successful campaign, making sure you only get the highest quality clicks is essential.

Currently, over $16.4 billion of advertiser’s money is lost to ad fraud every single year, with most of it being lost to click fraud. If you’re thinking about venturing into the pay per click industry, then fighting back against this type of fraud is essential. It’s either that or you might as well write them a cheque!

To help you fight back against these unwanted fraudsters, we’ve made the perfect click fraud detection platform. Suitable for any Google AdWords campaign, installation only takes a few minutes, and all of your ads will be fully protected from fraudsters. What have you got to lose? Sign up for our free 30-day trial below.