How AdWords works
To understand how AdWords works and make the most of your advertising budget, it's important to familiarize yourself with some key building blocks -- like keywords, placements, Ad Rank, bids, and Quality Score.
How keywords trigger your ad to appear
Keywords are words or phrases you choose that can trigger your ad to show on search and other sites. For example, if you deliver fresh flowers, you could use "fresh flower delivery" as one keyword in your AdWords campaign. When someone searches Google using the phrase "fresh flower delivery" or a similar term, your ad might appear next to Google search results. Your ad can also appear on other websites in the Google Network that are related to fresh flower delivery.
Tip: Create a list of keywords that are most relevant to your product or service. Make sure you use specific keywords -- rather than more general keywords -- to increase the chances that your ad is showing to people who are most interested in your product or service. For example, use the keyword "fresh flower delivery" rather than simply "flower." This improves your ad's performance and helps your advertising dollars go further.
Placements: Advertising on non-search websites
Keywords can trigger your ads to appear next to search results on Google and other search sites. But keywords can also trigger your ads to show on other sites across the Internet -- Google-owned properties like YouTube as well as Google's partner sites like NYTimes.com or Families.com, for example. We call these placements, which are part of what we call the Display Network.
Google can automatically determine where your ads appear by matching your keywords to websites in the Display Network. Or, if you'd like greater control over where your ads appear, you can pick specific placements yourself. You can set bids for each and choose the sites where your ads might appear.
Ad Rank: How Google determines which ads appear in which positions
Now let's suppose that multiple advertisers use the same keyword to trigger their ads or want their ads to appear on the same websites. Google uses Ad Rank to determine whose ads will appear, and in what order.
Your Ad Rank is based on a combination of:
- Your bid, which is how much you're willing to spend
- The quality of your ads and website
- Expected impact from your ad extensions and other ad formats
A bit about bidding and ad quality
Your bid and ad quality can work slightly differently across different campaign types. Here are a couple of examples to help illustrate.
With a keyword-targeted ad on Google and its search partners, your bid is based on your maximum cost-per-click (max. CPC) bid, the maximum amount you're willing to pay for each click on your ad (though the final amount you're charged per click -- your actual CPC -- could end up being less). Your ad quality is calculated based on the components of Quality Score: expected clickthrough rate, ad relevance, and landing page experience.
At the end of the day, what you pay
Each time an AdWords ad is eligible to appear for a search, it goes through the ad auction. What you’re charged (your actual CPC) is often less than your max. CPC bid because, with the AdWords auction, the most you'll pay is what's minimally required to hold your ad position and any ad formats shown with your ad, such as sitelinks.