• search
  • 1300 2266 24

How does Google Ads work?

How does Google Ads work?

Posted in Google Ads by on March 15, 2015
Last updated on 07/05/2021

Its a common question and unfortunately many search engine marketing companies neglect to inform you about the inner workings of Google Ads so read on to get a basic understanding of the Adwords system, its core principle and how to get the best return on your advertising investment when embarking on a Google Ads campaign.

The most important Adwords concept to understand is relevancy.

Google is Google because it works. This means that when you use Google to find something you want to know about, learn about, research, purchase, find, whatever it may be, it generally works. Most would agree that they have never had an issue finding what they want quickly and easily with Google. This is because Google places emphasis on relevancy, it wants to deliver the search result that users want, not what advertisers want to pay the most for. Thus there is no point trying to optimise your website to appear under a certain search term if your business and website are not relevant. This would mean Googles end user (i.e. the searcher) doesn’t get what they want and will go elsewhere. Not good for Google and their sharedholders.

The second principle to understand is how Adwords calculates your ad position.

Where your advert appears in the list is a 50:50 mix of Quality Score and an advertisers Cost Per Click Bid (CPC). It is not whoever pays the most comes first and thus is one of the primary reasons why small businesses are attracted to the advertising platform because they can compete with the big players without having deep pockets.

So what is a Quality Score?

Quality score is the importance (i.e. relevancy) of your website/advert/campaign for a particular keyword.
It is a score out of 10.
It is calculated every time (yes every time) someone searches for your keyword / phrase.

What about Cost Per Click?

Cost per click or CPC is the price you (as the advertiser) are prepared to pay each time someone clicks on your advert. Think of it as a ceiling price for your advert.

And Position Rating?

The position rating is the score that Google gives your website/advert/campaign for the keyword. It is not the position.

The advertiser with the highest position rating comes first.

Let me explain with an example…

In the following example, you would expect website A to come first because it has the highest position rating right?

adwords example a

It will, but the advertiser won’t pay $0.50 a click as Google will only charge what it costs to beat the next advertiser – i.e. advertiser B

adwords example b


Therefore, website advertiser A would only need to pay $0.40 per click to get the highest position and not the $0.50 they are prepared to pay.

adwords example c

So how much would website advertiser C need to pay to get first? The answer is $1.85! (3.7 divide 2)

adwords example d

Why is the Cost Per Click so different?

Well, its because the quality score is so low (2/10) and so the advertiser has to spend almost FIVE TIMES more for each click to get the same positions as those advertisers with high quality scores.

Adwords is one of the best at return on investment marketing and in order to get the best bang for buck, your quality score needs to be as high as possible otherwise you’ll be spending more than you need to in order to appear in the positions that deliver results and we all know that means top of the page!

So how can I improve my Quality Score?

No one knows the exact calculations for determining quality score and they change regularly but it does include things like

  1. The quality of your website code (i.e. free website builders and DIY are a no no)
  2. Location and quality of your website hosting (i.e. if you’re in Australia, your site should be hosted in Australia)
  3. How often your website is updated (i.e. News and Blogging)
  4. How relevant your website content is
  5. Your physical location
  6. Past performance of your campaign
  7. How well your Adwords account has been configured
  8. Relevancy of your adverts, keywords and landing pages

And many many more.

Can you help me with Adwords?

Adwords is a complicated system that continuously evolves and given how important Quality Score is to your campaign costs, we do not recommend do it yourself Adwords campaigns.

Concise Digital are Google Ads Certified and you’ll often find that our fee is offset by the saving you’ll receive in CPC bids because we know how to increase your quality score.

If you would like us to review your Adwords account or find out more about Google Ads and how it could work for you, please contact us.

Gareth Lane

No BS Digital Marketer/Educator

My passion is helping small businesses be more successful online by showing you the mistakes I made and ensuring you avoid the advice that did nothing for me.

I’m one of the directors of Concise.Digital. I run regular talks, workshops and meetups on Google, eCommerce and all things Digital Marketing.

I live in Perth, Western Australia, enjoy wine, food and the sun.

Show More

Would you like notification of new posts?

Subscribe to Learn, and you will receive an email with a link to each new ‘ How To’ Blog
article and each new Concise Webinar replay.