For many businesses Google AdWords has replaced all other forms of marketing for their business. Yet, many don’t really understand how Google AdWords works.

Taking out an ad in the Yellow Pages or in the local newspaper was relatively easy to understand. You paid so much for an ad based on its size and it showed up in the phone book or your newspaper.

Learning how Google AdWords works helps you to develop your successful campaigns
Understanding how Google Ads works is critical.

Google Ads is much more different

Many assume its something like eBay, where the top bidder gets the highest position.

For search campaigns you’re not paying for the top position.

You only pay when someone clicks on your ad. Which is why Google uses a different approach to the advertising platform.

Bidding is a key element, but its not the only factor that determines when your ad appears and what position.

How Does Bidding Work on Google AdWords Work

Google is a business and wants to make money. That only happens if someone clicks on an ad. This is why Google isn’t strictly an auction.

If a business has a top bid of 10 dollars, but no one clicks on the ad, Google makes nothing. That is why they use AdRank. It’s a combination of your bid plus what they call Quality Score.

Quality Score takes into account how well people like your ad and also how effective your landing page is, among other things. For an in-depth article on the topic read What is Quality Score in Google AdWords and How To Improve It

If you are bidding lower than a competitor, but your Quality Score is much better you could leap frog their ad despite their higher bid.

That’s because Google thinks you’ll get more clicks than your competitor and a result make more money.

Also you might not always pay your top bid. If you’re bidding 5 dollars and your competitor is bidding 4 dollars, then your cost will be just 1 cent above theirs. Your cost is 4.01.

This is why your cost per click constantly fluctuates.

How Your Ad Appear in the Search Results

When you set up your campaign you choose keywords. This is what determines when your ads appear in search campaigns. If you have the word Boston Realtor and someone types in Boston Realtor and they’re in your targeted market, they’ll see your ad provided your bid and Quality Score is high enough.

Google has different keyword match types and each works differently, so depending on your keyword choice your ad could only appear for a limited number of terms or it could show for a number of phrases, some perhaps unrelated to your business. Read my article on Which Keyword Match Type To Use for Google AdWords

When you set up your campaign you choose a location for where your ads run. If you’re only targeting the Boston area, then only people in that area will see your ads.

If someone outside your area needs a Realtor in Boston, however, they won’t see the ad. Which is why for some campaigns you want to advertise nationally, even if you serve one market.

The other advantage to AdWords is that you can target one community and as a result don’t have to add your community to your keywords. If you’re targeting only Boston you can simply target the word Realtor and they’ll see the ad.

With Google Ads you can target entire countries or just a few miles around a location.

The Definition of Google AdWords Impressions

What is an impression on Google Ads? Impressions are the number of times people who type in one of your keywords are exposed to your ad or see it on a page targeted in a display campaign.

The higher your ad ranks for that keywords, the more impressions you’ll have for it.

When you see Below first page bid it means few impressions
Below first page bid means few impressions

If Google warns you that your bid is below first page estimates than almost no one will even see your ad as most people don’t go past the first page in doing a search. Often they don't scroll down the page.

Even if you’re showing up at the number 5 position on the first page, few people will see it. That’s because only the top 4 ads typically show at the top.

The less restrictive keyword match type you use, the more impressions you'll also see. Broad match keywords will see significantly more impressions than if you were targeting the same phrase as exact match.

Yet, just getting a lot of impressions isn’t always a good thing.

For example, you could target the phrase Britney Spears and get a lot of impressions, but that won’t benefit you if you help sell homes.

You want impressions by people who are actively looking for your product or service or might soon be in the market for what you offer.

In talking about impressions, I’m only talking about how they relate to search campaigns. Display campaigns are different, particularly if you’re focusing on branding. Read my article on What are Google AdWords Impressions and How They Impact Your Costs

How Your Daily Budget Works

This might be the area that causes the most confusion for business owners. They think that if they set their budget to 10 dollars a day, then it shuts off automatically when it reaches that amount. Unfortunately, it doesn’t quite work that way.

Google used to have a policy that they could go as much as 20% over your daily budget. They changed that to 100%, saying its because certain days have more demand and they want you to benefit from that.

What that also means is that on other days your daily budget could be much lower. That’s because they want your daily budget to average out over the month to your set amount. Supposedly.

To stick to your daily spend, Google multiplies your set daily budget times 30.4 times for the month. If you’ve set your daily budget to 10, then for the month you’ll spend 304 dollars. The problem is that not all advertisers run the entire month.

Some businesses only run their ad during the week. Suppose this works out to 21 days a month. You might assume that your monthly spend would be 210 dollars. But Google simply only uses the 30.4 figure. So now you’re spend could be 300, significantly more than you might have wanted to spend.

This is why Google writes in its policy that “campaigns that are paused in the middle of the month or that otherwise don't run for the full month, you may see discrepancies between your average daily budgets and your total charges.”

Average Position on AdWords and Why It Can Constantly Change

The other concern many business owners have is where their ad is showing.

They might see it in the first position in the morning, then see it drop down 2 spots later in the day, even though their bid hasn’t changed. This is because the market is fluid and constantly changing. Some advertisers might not run the same hours as you or has a different budget.

As competitor’s daily budgets are used up they can drop out of the competition for that day. Or they might value prospects that are searching at specific times of the day and modify their bids according.

For example, a person searching for a place to eat for supper could be of more value if its around meal time. As a result, an advertiser might raise their bids 20% at certain times of the day.

The position of your ad can appear dramatically different on mobile devices than desktop. A competitor might use bid modifiers to increase bids on mobile devices compared to those on desktop if they feel that person has more value.

Read my article Why Isn’t My Ad Number 1 on Google AdWords Anymore? to learn more about the factors effecting your ad position.

How You Are Billed (Why Your Credit Card Charge From Google Seems To Change All The Time)

Google offers two payment options for AdWords, post pay and prepay. Prepay means you put so much money in your account and your ads stop running when your account is depleted. This means to get your ads going again you have to make a deposit into your account each time it runs out.

Most businesses use the post pay method so that their ads run continuously. The problem with this is that businesses become frustrated because their credit card charges seem to change over time. This is because Google has billing thresholds, in addition to a 30-day limit.

When you begin AdWords, they set the amount at 50 dollars. When you’ve spend that, your credit card is charged. If, however, you haven’t reached that 50-dollar threshold after 30 days, then they’ll bill you for the amount you have accrued during that time.

Over time Google will increase your threshold, particularly if you spend a lot. It will go up to 200, then 350 and finally 500 dollars. You don’t know when your card is billed or how often in a month.

Why Your Ads Might Not Be Showing The Entire Day

You might be frustrated when you search for your ads on Google and don’t see them running. Most likely this is because your daily budget is too low. Either your budget has run out completely or its not large enough to run continuously throughout the day.

With standard they try to spread your budget out for the day so it’s still running at the end of the day. If your budget is limited, then it won’t be running all the time simply because Google is spreading out your ad appearances.

There are, however, other reasons your ads might not be running.

Read my article on Why My Ads Aren't Showing on Google AdWords. There could be some serious reasons why your ad isn't showing.

Ideally Google AdWords works when someone in your market types in a keyword related to one of your products or services and finds you ads and then clicks on it. Unfortunately, simple mistakes along the way can cause your ads to show to the wrong people for the wrong reason. Therefore, it’s so important to set up your campaign property in the beginning.

As you can see it’s also very complex. From enhanced cpc to sitelinks there are a lot of things to learn. This it is why it’s become a full-time job to learn and keep up to date on the many changes to your account.

If you realize you can’t do AdWords on your own, then contact me. As a Google AdWords consultant I provide short term help or monthly management to help generate real business from your campaigns.