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How Google Ads Work

A simple way to test out a business idea or product is to run an ad on Google to see if you can generate any customers.

Google Adwords is a platform that allows you to run ads on search result pages in Google. Don’t confuse this with Google Adsense, which allows you to host ads by other people on your website.


The how-to’s of setting up an ad on Google change as updates and improvements are made to the Google Adwords interface, but the general principles of how the ads work stay the same.

1. Ads are targeted to specific keywords and specific geographic locations (if necessary).
2. Ads are written. A headline, a line of text, and a link are provided.
3. A budget and “bidding limit” is set. The “bidding limit” is the maximum price you are willing to pay to get one person to click on your ad. This can range from several cents to several dollars.
4. Ads run.
5. Customers click your ad. You pay Google for each click, and the price can fluctuate with varying traffic, relevance of your ad to the search term, and ranking of your ad. You can set a budget, such as $10.00 per day, so that there is a limit to your expenses.

How the Ads Show Up In Search Results

Ads can show up above the search results at the very top of the page, or they can be in the margin at the top of the right-hand side of the page.

The topmost ad is always considered the most valuable, as these generally get the most clicks and cost the most.

How Ads Can Rank Higher

Basically, there is an auction going on for the ad space. The ads which are most relevant to the search term get some priority, and the ads which are willing to pay the most per click get some priority. The order in which the ads show up on the page is based on an equation including both of these factors.

Google looks at how relevant your ad is to the keyword that was searched by the user, how relevant your landing site is to the search term (the landing site is the site that is visited when somebody clicks on your ad), and how much you are willing to pay to have a customer click through to your site. This is set when the ad is created, but can be adjusted.

What You Will Pay

The bidding price is important. When you set up the ad you can allow Google to adjust your bid price to optimize for the most clicks, or you can set a hard limit to the price that you are willing to pay for each click.

For an example, let’s say you set a daily budget of $5.00 for an ad. If you set a bidding limit of $0.50 you can expect to get at least 10 clicks on your ad, but it may take a while because if any ads have a higher bid limit they will probably show up higher in the ad rankings.

It is entirely possible that you will get more than ten clicks. If the competition in your market is low you might only pay $0.25 per click, meaning you will bring in 20 people through your ad before your budgets runs out.

If you allow Google to choose your bidding limit it will almost always bid higher and bring in fewer people to your site, in my experience. Google may bid $1 or $2 or even more per click for you, meaning you might only get three or four clicks on your ad before your budget runs out. There is a good chance, however, that you will get these clicks very quickly.

In a recent campaign I let Google set my bids and it burned through my $10 limit in less than twenty minutes, bringing in eight customers. I then set the limit to $0.50 per click for another $10 budget and brought in twenty clicks over the course of about one day.


It is my preference to pay less and get more traffic over a longer period of time. This allows me to react and make adjustments to the ad or to my site if need be.

Different situations call for different tactics, though, and you may have a situation in which getting traffic to your site fast is necessary and worth the expense.

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