Short answer: Google Ads works as a live auction. When someone searches on Google, every advertiser bidding on a matching keyword enters an auction. Google ranks the ads using Ad Rank, which combines your bid with the quality of your ad and landing page and the context of the search. The highest-ranked ads appear, and with most search campaigns you only pay when someone clicks. You set your own budget and can stop at any time.
Google Ads (called Google AdWords until 2018) is Google’s advertising platform. It can show your ads on Google Search, Google Maps, YouTube, Gmail and millions of partner websites and apps. This guide explains how it works step by step, in plain English, so you can decide whether it is right for your business and avoid the most common ways to waste money.
How Google Ads works, step by step
- You choose what you want. Calls, website enquiries, sales or people visiting your shop.
- You choose where your ads can appear and who sees them. For a search campaign that means keywords, locations, languages and devices.
- You set a budget and a bidding strategy. This controls how much you spend and how Google bids for you.
- Someone searches. Google finds all the ads that are eligible for that search.
- The auction runs in a fraction of a second. Google calculates an Ad Rank for each ad.
- Ads are shown in order of Ad Rank. Ads that do not reach Google’s minimum quality level are not shown at all.
- You pay when someone clicks. The price is set by the auction, not by a fixed rate card.
What is Ad Rank?
Ad Rank decides whether your ad appears and in which position. Google’s help pages say Ad Rank is based on six things:
- Your bid: the most you are willing to pay for a click.
- The quality of your ad and landing page: how relevant and useful they are to the person searching.
- Ad Rank thresholds: minimum standards an ad must meet to show in a position.
- The competitiveness of the auction: how close your Ad Rank is to other advertisers’.
- The context of the search: the words searched, the person’s location, their device, the time and other signals.
- The expected impact of ad assets: extras such as your phone number or links to other pages.
This means the highest bid does not always win. A more relevant ad with a better landing page can appear above a competitor who bids more.
What is Quality Score?
Quality Score is a score from 1 to 10 that Google shows in your account for each keyword. It is a summary of three things:
- Expected click-through rate: how likely people are to click your ad.
- Ad relevance: how closely your ad matches what people searched for.
- Landing page experience: how useful and relevant your landing page is.
Quality Score is a guide to help you improve. It is not used directly in the auction, but the same quality signals feed into Ad Rank.
How much do you pay per click?
You set a maximum cost per click (max CPC), or let Google’s automated bidding set it. Google’s help pages explain that you are often charged less than your maximum, because you only pay what is needed to clear the Ad Rank threshold and beat the advertiser just below you.
Google also states that higher quality ads often lead to lower costs per click. So improving your ads and landing pages can save money as well as win better positions.
Costs vary enormously by industry. Our guide to Google Ads costs in the UK shows real cost-per-click examples for common local businesses.
How Google Ads budgets work
You set an average daily budget for each campaign. Two rules from Google’s help pages are worth knowing:
- On a busy day, Google can spend up to twice your average daily budget. Quieter days balance it out.
- Over a month, you will not be charged more than your average daily budget multiplied by 30.4, the average number of days in a month.
There is no minimum spend set by Google, and you can pause campaigns whenever you like.
Types of Google Ads campaigns
| Campaign type | Where ads appear | What they look like | Best for |
|---|---|---|---|
| Search | Google search results | Text ads with headlines, descriptions and links | Services people search for, such as “electrician in Colchester” |
| Shopping | Google search results and the Shopping tab | Product image, price and shop name | Online shops with a product feed |
| Performance Max | Search, Shopping, YouTube, Display, Gmail, Maps and Discover | Google builds ads from your text, images and videos | Businesses with good tracking that want reach across Google |
| Display | Millions of partner websites and apps | Image and banner ads | Awareness and reminding past visitors (remarketing) |
| Video | YouTube | Video ads before, during or beside videos | Brand awareness and explaining a product |
| Demand Gen | YouTube, Gmail and Google’s Discover feed | Image and video ads | Building interest before people search |
| App | Google Play, Search, YouTube and more | App install ads | Getting app downloads |
For most local service businesses, a well-built Search campaign is the best place to start. If you sell products online, read our guide to Google Shopping ads.
Keywords and match types
In Search campaigns, keywords tell Google which searches your ad could appear for. Match types control how closely a search must match your keyword.
- Broad match: your ad can show for searches related to your keyword, even if the words are different. It reaches the most people but needs careful watching.
- Phrase match: your ad shows for searches that include the meaning of your keyword.
- Exact match: your ad shows for searches with the same meaning as your keyword.
Negative keywords stop your ad showing for searches you do not want, such as “free” or “jobs”. They are one of the simplest ways to stop wasted spend. Read our guide to negative keywords.
Bidding strategies
| Strategy | What Google aims for | When to use it |
|---|---|---|
| Manual CPC | You set the bid for each keyword | Small, tightly controlled campaigns, or when you have little data |
| Maximize clicks | As many clicks as possible within budget | Getting traffic to a new site while you build data |
| Maximize conversions | As many conversions as possible within budget | When conversion tracking is set up and working |
| Target CPA | Conversions at or near a cost per acquisition you set | When you know what a lead or sale is worth |
| Maximize conversion value | The highest total value of sales within budget | Online shops tracking sale values |
| Target ROAS | A set return on ad spend | Online shops with steady sales data |
Automated strategies only work well when Google can see what counts as a result. That means you need conversion tracking.
Conversion tracking and consent
Conversion tracking records the actions you care about, such as calls, form enquiries and sales. Without it, you cannot tell which keywords and ads bring customers, and Google’s automated bidding has nothing useful to aim for.
Tracking usually uses cookies or similar technology, so in the UK you need to follow the rules on consent. The ICO’s guide to cookies and similar technologies explains what your website must do.
Ad assets
Ad assets (once called ad extensions) add extra information to your ads at no extra cost per asset. Useful ones include:
- Sitelinks: links to other pages, such as “Prices” or “Contact”.
- Callouts: short lines such as “Free quotes” or “Family run”.
- Calls: a phone number people can tap.
- Location: your address and a map link.
- Images: a picture alongside your ad, where eligible.
Assets can make your ad larger and more useful, and Google includes their expected impact in Ad Rank.
Common Google Ads mistakes
- Running broad match keywords with no negative keywords.
- Sending every click to the homepage instead of a matching page.
- Having no conversion tracking.
- Targeting a much wider area than you actually serve.
- Changing too much too quickly, before the data settles.
- Not answering calls and enquiries quickly.
Our full list of PPC mistakes that waste your budget explains how to fix each one.
Google Ads vs SEO
Google Ads brings visitors as soon as your ads are approved and running. SEO builds free visits from Google over months. Many businesses use ads for quick enquiries while SEO grows in the background. Our guide to SEO and PPC helps you decide how to balance them. Google is also no longer the only place to advertise to people researching online; our guide to ChatGPT ads explains the newest option.
Getting help with Google Ads
Google Ads is easy to start and easy to waste money on. If you would like an expert to set up or manage your account, see our PPC management service in Essex or our PPC management service in London.
Frequently asked questions
Is it worth doing Google Ads?
It is usually worth it when people search for what you sell, you can answer enquiries quickly and a new customer is worth more than it costs to win them. It is less suitable if nobody searches for your product yet or your profit per sale is very small.
How much does Google Ads cost?
You choose your own budget, and there is no minimum spend. For most search campaigns you pay per click, and the price is set by the auction. Costs per click vary widely by industry and location, from very low for routine local services to high for legal and emergency services.
Do I pay if people see my ad but do not click?
With standard search campaigns using cost-per-click bidding, you only pay when someone clicks. Some campaign types, such as certain display and video campaigns, can charge for impressions or views instead, so check the bidding option you choose.
Is Google Ads the same as Google AdWords?
Yes. Google AdWords was renamed Google Ads in 2018. Older articles and some people still use the AdWords name, but it is the same platform.
