How Google Adwords Works

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In a nutshell, Google Ads (formerly AdWords) is Google’s pay-per-click platform whose ads display on the very top and bottom of Google’s search results.It generates aproximately 20% of all clicks in a given search query (percentage is an estimate and not officially disclosed by Google) from all results, both paid and organic.

Started in 2000 and generates over 90% of Google's revenue (Q4 2018)

Businesses, big and small, use Google Ads to advertise through text, image and video ads.

Before we delve into what Google Ads is and how it works, let's watch a 2 minute video summary which will help you better understand the platform. After all, they say an image is worth a thousand words. Aloha!

Ok! Now, we can go see the ins and outs of Google Ads in greater detail. In a different article, we delve into what it takes to build a great AdWords campaign structure.

Google Ads: King of Inbound.... and Outbound Marketing

Inbound marketing is when the user is looking for our product or service and is a main trait of digital marketing. Outbound marketing, on the other hand, is when we are looking for the prospective customer and do so by sending letters, postcards or advertising in social media channels.

Inbound marketing channels, in most cases, yield a greater return on investment than outbound marketing channels.

In another article titled ‘How to advertise on Google’ we delve into why AdWords is the best marketing channel for small businesses. In this article, we tackle what is Google AdWords and how it works.

Google Ads is considered the most effective inbound marketing channel.

Starts by... the user looking for something

Since text ads are by mar the most popular in Google Ads, let's focus on them and see how they work.

Over 60% of Google searches happen from mobile devices.

Someone searches for something in Google....anything.

In AdWords is all about the search query. The Google user types what s/he is looking for - whether buy something, look for directions or the latest video of La Macarena. The advertiser creates a list of terms for which s/he is willing to have an ad copy displayed and whose clic will originate a cost - the so-called cost per click.

Most often, the search terms an advertiser bids on signal purchase intent and start by the word buy and/or similar wordings.

A typical keyword a retail apparel business would likely bid on would be buy fashion shoes nearby me for instance.

The advertiser comes up with a list of terms. When somebody writes them in Google, the ad copy can show up and upon being clicked, generates a cost.

Google matches the search query with the keywords present in the AdWords’ advertiser keyword pool. If a match is found, Google will run an algorithm aimed at determining relavance and quality, also known as the keyword quality score, alongside the bid placed by the advertiser.

Since there is only room for up to four adverts on top of the search results and up to two below them, the algorithm will determine which 6 keywords have the highest quality score. AdWords will then place their corresponding text ads in the search results page accordingly.

The user has now an option - or better yet, up to 17 options, 17 results in the first page for her/his search query. 4 ads on the very top, followed by 10 organic results followed by up to three additional text ads on the bottom of the search results page. If Google deems the search query to have local intent, a map with up to three local results will be placed in between the top ads and the ten organic results.

Although no official percentages have been disclosed, it is estimated that up to 20% of all Google users click on the text ads, 35% do so on the local results whenever present, and the remaining 45% click on one of the organic results.

Given how competive are many industries, ranking in one of the ten organic results is many times a lengthy and ardous process. Google AdWords -the 4 text ads on top of the results- provides for an immediate solution since the text ad can rank on top of them as soon as the campaigns are created.

The more thought you put into writting a great ad copy, the more clicks it will get which translates into a lower cost per click overtime.

We can see below an ad text that is properly written, using all real estate available and an ad text that is poorly written. The ad text that is well-done will actually be cheaper as Google rewards the higher user interaction with them.

Let us continue with display ads

We already know ad texts, awesome! Let us get to know now Display Ads which offer a very intersting and rewarding alternative for certain industries.

You are reading your favourite newspaper and, plas! you see an image alongside the article that stands out. These are the display ads from Google Ads.

Have you ever clicked on an ad that you have come across in any webpage you have visited? Most likely, your answer is a clear no.

Over 95 percent of image ads are irrelevant to those viewing them.

This number highlights the importance of ensuring your images are placed in relevant websites that your audience cares about.

Like ad texts:

If people don't click on my image ads, Google won't charge me for having displayed it.

To implement and build a successful google ads display campaign, we recomment reading the article where we analyze the keys to make them successful. How to create successful display ads..

Finally... this someone visits the website and gets to buy

When a user clicks on an ad, s/he is redirected to the advertiser’s website and is now a potential lead who can buy the product or service the advertiser has to offer.

When this happens, and if the cost of the clicks that take for a user to buy is less than the product’s price tag minus the margin, the advertiser has a positive return on the investment (ROI).

To sum up, Google Ads makes for an excellent channel to drive more traffic and aquire more users for all companies, big and small. It is important to optimize the Google AdWords campaigns to ensure a positive return on the investment. Kolau is currently one of the most powerful AdWords automated otpimization engines as well as the most affordable with free plans available.

Example of a good landing page with a persuasive offering:

Let's look at an example

Sawtooth Roofing, a roofing repair business, explains how Google AdWords works and how Kolau's optimization engines are helping them gain more web traffic and more business while paying less for their campaigns.


Google AdWords is the best channel to be found when your product is searched because over 90% of your customers search for it in Google.

With Kolau Small Business gain more from Google Ads while paying less. Kolau’s optimization engines enable advertisers to remain in full control of their account while Kolau automates their Google Ads account 24/7. Gain more and spend less. Let’s go!