Google Adwords

Google Adwords

Adwords is a service provided by Google that enables businesses to advertise on its search engine. Below is a detailed introduction into how some of it’s features work and how you can take advantage of this service.

Ad location

Google Ads are displayed on the right-hand side and the top of the search. By default, your ad will end up on the right-hand side – you are only eligible for a “top [of page] ad” if you have an Ad Rank that meets a minimum threshold. This means you cannot sign up and straight away have your ads appear at the top of the search.

Location specific ads

This enables you to set a location(s) on where the ad will be displayed: locally, statewide, nationally, and internationally. You don’t pay more for extra coverage but keep in mind; the wider the area it’s being advertised, the more the chance it has to be clicked – which makes it more expensive when you’re paying for each click.


Cost per click; this works like an auction. For example, if you wanted your ad to display when someone searches for “Canberra web design”, you have to put a bid in for how much you’ll pay each time someone clicks it. If someone else who wants their ad shown with the same keywords, you must outbid them to have your ad before theirs.

Ads are listed in hierarchical order depending on Actual Bids. Actual Bids are generated by Google and are calculated by a number of factors – Maximum Bid, Quality Score and Ad Rank. Maximum Bid limits the amount Google spends on your Actual Bids.

Google Adwords Ad Rank

As you can see in the image above, the ads are ordered on the business’ Ad Rank. To get the Ad Rank, we simply multiply the Maximum Bid by the Quality Score. As you can see, although the 4th business’ Maximum Bid is higher than anyone else’s, their ads are of poor quality which gives them a low Ad Rank and shoves them to the bottom of the list.

Google Adwords Actual Bid

In the image above, we add in the Actual Bid, which is what determines the hierarchy of the ad layout.

Imagine your business is listed 1st here – how did Google calculate how much you needed to pay to stay on top? You take the highest (or next highest) Ad Rank and divide it with your Quality Score (refer to picture: 32 divided by 10), doing this reveals that your Actual Bid is $3.20 per click to stay on top. This is what Google will charge you. Obviously your maximum bid must be large enough for you to outbid your competitor.

Let’s pretend your business was the 3rd in the list (in the image above), if you wanted to boost your ad to the top, you could increase your Maximum Bid, which will raise your AdRank and enable Google to increase your Actual Bid. Although increasing your Maximum Bid may see your budget may blow out quickly.


Keep in mind, you are not charged each time your ad is displayed – you only pay when it’s clicked.

For example, you may be paying $5 per click (actual bid) and there have been 1,000 searches for your keywords but only 10 of these people have clicked your ad. 1,000 people still may have seen your ad but you’re only paying $50 for that advertising. Of course, always remember you may be paying what you’ve set as your Maximum Bid for each click so ensure you’re willing to pay that amount.

Quality Score

If you’re about to start with Adwords or you’re thinking of starting soon; ensure you focus on obtaining a high Quality Score as this is a very important component of your whole advertising campaign. It’ll drastically affect (one way or another) the amount of money you spend as well as the position of your ad.

Lets look at it in further depth. As stated earlier, Ad Rank comprises of your Maximum Bid and Quality Score, this is calculated from a number of factors, some of these include:

  • Your keyword's past click-through rate (CTR): How often that keyword led to clicks on your ad
  • Your Display URL's past CTR: How often you received clicks with your Display URL
  • Your account history: The overall CTR of all the ads and keywords in your account
  • The quality of your landing page: How relevant, transparent and easy-to-navigate your page is
  • Your keyword/ad relevance: How relevant your keyword is to your ads
  • Your keyword/search relevance: How relevant your keyword is to what a customer searches for


Having a good Quality Score doesn’t only enable you to display your ads at the top of the page; it affects a number of other things such as:

  • Ad auction eligibility: Higher Quality Scores make it easier and cheaper for a keyword to enter the ad auction.
  • Your keyword's actual cost-per-click (CPC): Higher Quality Scores lead to lower CPCs. That means you pay less per click when your keyword has a higher Quality Score.
  • Your keyword's first page bid estimate: Higher Quality Scores lead to lower first page bid estimates. That means it's easier for your ad to show on the first page of search results when your keyword has a higher Quality Score.
  • Your keyword's top of page bid estimate: Higher Quality Scores lead to lower top of page bid estimates. That means it's easier for your ad to show towards the top of the page when your keyword has a higher Quality Score.


For more information, please check out the links below – they will give an even better idea of what has been explained in this article.


Earning money from ads on your website

On the other side of the fence – you can earn money from Google ads by letting them appear on your website. AdSense is another Google service that allows you to sign up and let their ads appear in specified places on your website.

Every time an ad on your website is clicked, it will earn you revenue. As we found earlier – ads don’t have the same price tag, therefore you will receive a percentage of whatever the Actual Bid is for that ad.

The ads that will be shown will relate to your content and you can even choose the colour scheme to suit your website’s design.

This may not be suitable for all websites – but if you’ve got some spare space that you don’t mind giving up, you could earn yourself a small amount of money for basically nothing. In saying that – don’t compromise your website’s design with throwing ads in because you think you can earn an easy buck. This may give your website a less trustworthy look and result in less customers for your actual business.

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