Before we begin, it is important to know What is Google AdWords? So, first let me explain what is AdWords.
Google AdWords is Google's
advertising program in which advertisers bid on certain keywords in
order for their ads to appear in Google's search results or on Google
Ads enabled websites and blogs. Advertisers
have to pay every time someone clicks on these ads. Google keeps a
portion of the revenue generated from this system while the rest is
credited to the account of the publishers. Google AdWords and Google
AdSense has now become Google's main source of income.
In
simple words, Google AdWords is program by which Google allows
advertisers to bid on keywords. The advertiser who wins the bid, gets to
show his ads on the search results or on Google Ads enabled sites.
Whenever someone searches for that particular keyword, ads of that
advertiser appear in the search results. In case of AdSense, Google
looks for articles which feature that particular keyword. If Google
finds a match, then ads of that particular advertiser shows up next to
the article.
So, How Does AdWords Work? Lets find out!
In AdWords all you have to do is to bid on keywords that is most relevant to your ads as an advertiser. But it is not as simple as it sounds, since you are not the only bidder in AdWords, brace yourself for some stiff competition from advertisers, before you begin. If you get everything right, AdWords can prove to be very effective for your company. To get everything right you have to successfully bid on most relevant keywords for your ads and that too under your budget. Plus your ads have to be attractive and user friendly, for a good Click-through-Rate, otherwise you will end up wasting money on nothing!
It all depends on how well you bid for your keywords without spending too much money on it and thanks to AdWords complex bidding process, its no easy deal. I would advice you to hire a specialist to manage all your Ads Campaign. Since, everything depends upon how well you bid, so, lets dig a little deeper into the AdWords bidding process. I found this extremely good infographic by WordStream which clearly explains the bidding process.
So how does AdWords bidding work?
"The actual position of your ad is determined by your ad
rank (Maximum Bid x Quality Score). The highest ad rank gets the 1st
ad position. Your actual CPC will be determined by the ad rank of the
next highest ad below you divided by your Quality Score. The only
exception of this rule is when you are the only bidder or the lowest bid
in the AdWords auction; then you pay your maximum bid per click!
AdWords bidding heavily penalizes advertisers who bid with low quality
scores. Conversely, those with high Quality Scores get higher ad ranks
and lower CPC." - WordStream
The bidding process run billions of times each month this helps users find ads which are most relevant to what they're
looking for. This also helps advertisers interact with potential customers at the lowest
possible prices while Google pockets billions of dollars in revenue.
To help you digest the above infographic better, let me elaborate on certain "keywords" used in the above infographic.
Google Quality Score : This is a metric Google uses to determine how relevant
and useful your ad is to the user, based primarily on your ad's CTR,
keyword relevance, and the quality of your landing page. The higher your
Quality Score, the better: high Quality Score keywords will save you money and earn you better ad rankings.
Ad rank : It is the rank of your ads on the page your ads will be displayed.
CPC : The amount of money you pay when someone
Ad rank vs Quality score : The ad rank is more significant to an advertiser because
it determines the how high on the page the advertisement will be
displayed. Quality score on the other hand is determined by the
relevance and usefulness to the searcher and is only a portion of the
advertisement positioning process.As of 2013, Google's Quality score has become more and more valuable as the average quality score has changed from a 7 to 5.
Quality score vs CPC : Quality score and CPC are important because they
collective determine the positioning of the advertisement on the search
engine results page.
Source: WordStream
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