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What is Google Ads and How it Works? A Step-by-Step Guide in 2020

What is Google Ads and how it works? The most successful, intent-based ads and targeting can be found on Google Ads. Google shows us ads real time as we are searching for products and services on its search engine. The name has recently been changed to Google Ads and forms a major chunk, over 90% of the search engine marketing revenue in the world. Tech geniuses at Google have designed a software that serves Advertisers globally and brings in over 36 Billion USD annually in revenue. 

Let’s say you are searching for ‘digital marketing’ on Google. As illustrated below, the top 3 search results are Google Ads and the rest are organic search results:

What is Google Ads and How it Works?

For the first 3 Ads, people are paying money to be on top of the listing. Then there are organic, free listings. The free listing is where you optimize your website so that you can rank in the number one position. After the ads, that is. After the above illustration, we’ll be using the term PPC or Pay Per Click, because on Google Ads you pay only when someone clicks on your ad. 

You can learn more when I show you how to create a new campaign on Google Ads. 

Advertisers generally prefer PPC to compete with peer companies.

Here are a few acronyms that will help you in running Google ads. The first one is Interactions (earlier referred to as Clicks), it refers to the number of people who have actually clicked on the paid search result. Then there are Impressions, the number of times an ad was displayed in the Google search results. Then the CPC (Cost Per Click), the amount you are willing to pay or you will be paying when someone clicks on your advertisement.

Then there’s the Max CPC, the maximum amount an advertiser is willing to pay for an Interaction or Click. We will be going through all of these when we create a Campaign. Then CPM, the cost an advertiser pays when one thousand views are achieved on Google Display Ads. Don’t worry, if you’re unable to understand these terms as we will be learning about it when we create a Campaign. SERP is the page that displays the search results when completing a Google search. That is the search engine results page, SERP. Then there is the quality score, this is a very important metric when you are running Google ads. 

Quality Score

Quality Score is Google’s rating of the quality and relevance of your Keywords and Pay Per Click ads. So whenever you’re running ads, you’re also competing with other advertisers who are running ads for the same keyword. Whose ad gets prioritized in the Google ads result, is based on the Google Ads Quality Score. 


ROAS is return on ad spend, the amount of revenue received for every penny spent on advertising. This will give you a clear picture whether your campaign is successful or it is a losing campaign. 


Google Display Network is a collection of websites that includes Gmail, Blogger and YouTube that can also be used to run your ads. So Google Ads are not just getting your website on the number one position. Google also has a network of YouTube, Blogger, Gmail etc, where you can run your ads. 


ECPC (Enhanced Cost Per Click) is a bidding feature that automatically raises your bid for the clicks that seem most likely to lead to a conversion. Because the ultimate goal of your website is to drive conversions. If you are selling products, your conversion will be people who are actually purchasing the product. If you’re selling a service, your conversion will be someone paying for your services. having a conversion. In my case, the conversion might be getting the email of the people who are learning on my website. 


 CPA is the amount you are willing to pay for a conversion that is Cost Per Acquisition. 

First of all, organize your campaigns and ad groups before you start. If you’re not creating proper structures of your campaigns, your ads then it will be confusing for you later. So make sure you follow proper naming convention, proper targeting so that you are easily creating your Google Ads campaign. And also don’t target broad audience when you’re just starting out. Whenever you’re starting out on Google ads, try to go for a highly specific and targeted audience. Like for this module, targeting college students and people who are interested in digital marketing would be a good idea. 

This is because when I check audience insights,I know that a majority of my audience are college students so that is the reason I created an ad search at that level. Also I’m targeting who are interested in digital marketing, they are the most targeted people. And hence, I kept my ads very specific because I was just starting out. But later on, definitely you can clear the localized audience and you can even go broad, you can even test the core audience as well.

And also a very good practice is to create several ad groups per campaign. People have this habit of only creating one campaign and then adding only one ad set and only a few ads in that. So you should create multiple ad sets depending on the target of your campaign. And again, in every ad set you should create 3 ads (1 Responsive Search Ad and 2 Expanded Search Ads) so you can test which ad is giving you the best result. 

Testing is the key in digital marketing, be it ads, be it CRO, be it learning page, everything needs to be tested so that you can find the winner that is giving you the best return on investment. Also keep the number of keywords per ad group to only 10 to 15. If you’re trying to increase, then you won’t be able to see a very clear picture on which ad set is performing well. So keep the keywords around 10 to 15. And this is not a very important point- like start slow and scale your budget on the winning ads so whenever you’re starting out, make sure you’re doing it slowly. Don’t just put all your money and all the keywords in one go. Start slow, learn and optimize your campaigns or while your campaign is running then push more money on the winning ads. 

The last point here we’ll be covering a lot is the focus on intent and conversions. High CTR which is the high click-through rate is amazing, but without actually making money in the backend, those conversions are useless. So let’s say if I’m getting very cheap clicks, very cheap conversions, but then again if I’m not making money, those cheap clicks are worthless to me. So you have to make sure you’re driving cheap clicks at the same time you’re getting good conversions in the backend, you’reactually making money in the backend so that your overall campaign is profitable. And also learning the art of click-worthy ads is extremely important.

How to Create a new Campaign on Google Ads?

So let’s directly go to the campaign level and create a campaign so that you can learn more about- and understand how exactly Google Ads work. So to open Google ads, all you have to do is to go to Google and search Google ads. All you have to do is click on sign in and sign in with your email ID. I’ve already done that step, but once you sign in, it will ask you for a few details and I think it will also ask you to create your first campaign. 

What is Google Ads and how it works?

Click on Sales if you are looking to sell a product or service on your website:

What is google ads and how it works

Click on Search, Display, Video or Shopping Campaigns per your campaign requirements (I have chosen a Search Campaign)

Click on ‘Website Visits’ and enter your website’s URL 

Enter the name of your Campaign: (Best DSLR Cameras)

Enter the desired location targeting

Click On Advanced Search to Exclude Locations

Enter the desired language you want to run your Campaign in

Select Affinity and In-Market audiences like this

Set your daily and Cost Per Acquisition Budget

Create Ad Extensions (Sitelinks, Call Outs and Structured Snippets) to increase your CTR by 15% (more of that in a separate post)

Give a name to your Ad Group and choose 10-15 relevant keywords

Create Ads like this 

Congratulations, your campaign is ready to be published!

For more details on Google Ads set up and concepts, please review this page from Google.

This is all about “What is Google Ads and how it works”. Let us know in the comments section if you have any questions related to campaign creation. Also do read our posts on Social Media Marketing, Content Marketing and Instagram Marketing.

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