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What is AdWords?

Google’s AdWords program is where they make the vast majority of their billions in revenue each year.  This program allows individuals and businesses to create and display advertisements on the Google search results, Google properties (YouTube, ect) and even third party websites that partner with Google to share the revenue.  This isn’t a traditional advertising platform, however.  It harnesses some of the most advanced technologies to help businesses get their message in front of the right audience to help increase conversion rates and overall user satisfaction.

How it Works

When an individual or business sets up a new AdWords account, they are given access to a variety of tools to help them to create a new advertisement.  These ads can be just text, images, videos, animations or any number of other types of ads.  They can also be created to a variety of standard sizes based on where they want the ad to be displayed.  In order to get the advertisement to show up to actual people, it is necessary to set up a number of things to help Google display it at the right times and to the right people.

The following are some of the key settings, which Google will use when determining when and where to display the advertisement:

  • Targeted Keywords – When a user searches on Google, the word or phrase they type in is known as the keyword. Adding some keywords that the advertiser wants their ad to be shown for will help Google to know when to show the ad.  Google can also recommend keywords based on the content of your landing page.
  • Geographic Area – If an advertiser is only looking to target people who are in a specific geographic area, it is important to add this information into the account.
  • Price – Every ad that gets displayed on Google’s AdWords platform is ‘bidding’ against all other advertisers who want their ad shown. The advertisers can set a maximum price they are willing to pay for each click.  The more someone is willing to pay, the more likely their ad will be shown.  The actual price paid will typically not be as much as the max bid, however.
  • Demographic – It is possible to enter additional demographical information to help Google further target the advertisement. For example, entering the desired age of the viewer, or activities they may be interested can help.  If Google has this information for a particular user, they can help improve the results.
  • Other – There are other options that can be set as well. For example, if an advertiser does not want their ad to be displayed on third party sites (through the AdSense program) they may be able to opt out.

What Happens Next?

Once the advertisement has been properly set up, and the account is funded by the advertiser, Google will begin to consider in their inventory.  The most common time that this happens is when someone does a search on Google.com.  Based on the search phrase typed in and other information about the person doing the searching, Google will determine which ads from their inventory will be most likely to benefit the searcher.  They will then rank those ads, which gives them a ‘quality score.’

From that quality score, they will then factor in the price that each advertiser was willing to pay to have their ad displayed to people searching for that (or a similar) phrase.  Using a secret algorithm that balances the amount advertisers are willing to pay with the likelihood that a particular ad will be useful to the searcher, Google puts the ads in order to display them.

Finally, while also displaying all the normal search results, Google will add in a set number of advertisements.  This is typically one to three ads at the top, and then several along the sides.  All of this is done in a fraction of a second using Google’s many powerful servers located around the world.

Cost to Advertisers

Up to this point there hasn’t actually been any cost to the advertisers.  With the AdWords program, there are two ways that Google can charge the advertisers.  The first, and by far the most common, is called ‘cost-per-click’ and as the name implies, only charges advertisers when someone actually clicks their advertisement.  The other option is called “CPM” which essentially means a cost per 1000 impressions (times the ad is displayed, whether or not it was clicked).  The CPC is significantly higher than the CPM because a click means that the person actually saw the advertiser’s web page.

Is it Right for You?

As you can see, the AdWords program is extremely complex on the back end, but fairly simple for advertisers to get started with.  For most businesses, AdWords can be an extremely effective way to get their message in front of a very targeted audience.  When done properly, it can result in a great return on investment.  The important thing, however, is that advertisers continuously work to improve the overall performance by experimenting with different types of ads, different keywords and other adjustments.  In most cases, AdWords is a great addition to any marketing and advertising strategy.

From Google

To further help you understand what AdWords is, watch the video below created by Google.