What Is Google AdWords and How Does It Work?

February 18, 2024

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When Google released its AdWords service back in 2001, it changed the world of digital marketing forever. The platform has been updated quite a few times along the way, aiming to provide marketers and advertisers with a more comprehensive method of promoting their products in search results.

But, in spite of its longevity, a lot of business owners still have a difficult time understanding how Google AdWords works and how it can help them make money.

Let’s try to shed some light and teach you how to set up profitable AdWords campaigns.

Another post you might be interested in is: Can Google Adwords be profitable

What Is Google AdWords

Google AdWords is Google’s advertising system in which advertisers bid on different keywords, trying to get their ads displayed for a relevant search query.

Google ads appear at the top of search engine results before the organic results and have a small “ad” mark that lets people know that advertisers paid for the high rank.

The great thing about AdWords is that you only pay when the ad is clicked and not for the number of impressions. In other words, if your ad appears for your keyword ten times but only once prospects click on it, then you will only pay just for that one click.

How Google AdWords Works

The process that goes behind how Google decides which ads to display for certain search queries is very complex and the subject of numerous articles and case studies. However, we’ll try to explain the basics in a few simple words.

Whenever someone searches for something online, an AdWords auction will take place in which advertisers bid to have their ads shown on the display network. So, for example, if you want your ads to appear for the keyword “marketing tools,” then you’ll have to compete with other advertisers that bid for the same search phrase.

Google looks at the Quality Score and Ad Rank to decide which ads are the most relevant for a particular search query.

The Quality Score tells Google how well your keywords match, ads and landing pages relate to what searchers are looking for and how likely a person is to click on the ad. For example, if someone searches for “marketing tools” but the landing page talks about an entirely different thing, and visitors bounce, then that can affect your Quality Score.

The Ad Rank, on the other hand, is calculated as the Quality Score times the maximum bid. The higher the Ad Rank, the higher the ad positions you’ll get.

Account Structure

To get a better sense of what the deal with AdWords is, it pays to take a look at how the system is structured. Several components go into this platform and create a unitary service.

  • The Account

Here you’ll find all the information about user access, billings, account settings, and notifications.

  • The Campaigns

All the AdWords campaigns you’ll create will appear in this section. Here you can overview your budget, target, and overall performance of your campaigns. You can set a daily budget for each, and AdWords will stop running your ads once you’ve met your daily limit, so you don’t have to worry about overspending.

Furthermore, the Campaigns section is where you can decide who and how you target: by device, location, language, etc.

  • The Ad Group

The Ad Group allows you to structure and organize keywords and ensure you’ve chosen the most relevant ones to bid on. You can create several ad groups and set the bid at a group level, so all the keywords within it will have the same cost-per-click.

  • The Ads

That is where the creative part takes place, with deciding headlines, description, destination and display URLs. When you get to this part, it’s best to consult the AdWords ad policy to optimize your ads.

Once you’ve finished with the ad copy, take another look at your ad. This is the way your ad will look to the public, so if you’re not happy with something, make any changes you want until you get satisfying results. As a suggestion, make sure your ad copy sparks consumer interest, to maximize the link’s chances of being clicked, and have it be genuinely representative of your website.

  • Keywords

When a user searches for a particular keyword, all the other keywords from the ad group will activate, increasing your chance of getting a favorable ad position.

AdWords distinguishes between five types of keywords:

  • Exact match: This type of keyword appear when matched exactly to a search query;
  • Phrase match: They show when a query phrase is an exact match;
  • Modified broad match: Other words can appear within the phrase;
  • Broad match: They have the broadest reach and can be activated when AdWords recognizes similar keywords;
  • Negative match: You can use these keywords to exclude your ads from certain queries.


AdWords can be instrumental in getting qualified traffic to your platform, or just to promote your brand name and increase the chances of people recognizing it. The great news is that a properly-implemented AdWords campaign won’t even require a massive budget to be effective, provided you have the right strategy in place.

If you’re looking to branch out into the world of Google advertising, give us a call at Australian Internet Advertising and let’s get started.




Billy P.

About The Author

William Polson founded Australian Internet Advertising in 2013 and has over 12 years of experience immersed in Digital Marketing.

With an in-depth level of digital marketing knowledge, William has been sort after by and worked for, many large national brands including Subaru, Blooms The Chemist, and Nova 96.9.

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