To understand how AdWords works, it is important to become familiar with some basic concepts, such as keywords, placements, ad ranking, bids and quality.

 

How do keywords trigger your ad?

Keywords are words or phrases of your choice that can trigger your ad on search results pages and other pages. If you sell TVs, for example, you can use “buy samsung tv” as a keyword in your AdWords campaign. When users search on Google the term “buy samsung tv” or a similar term, your ad may appear next to Google search results. It can also be shown as well on other Web sites [Google Network] in connection with the sale of TVs.

By creating a list of keywords related to your product or service, and choosing specific keywords rather than generic (eg, “buy tv” rather than simply “tv”), you can show your ad to users most interested in your product or service. This improves the performance of your ad and increase the return on your advertising investment.

Locations: advertising on other websites 

Keywords can trigger your ads next to search results on Google and other search sites.In addition, they can trigger your ads on other websites: Google-owned sites such as YouTube and Google’s partner sites like NYTimes.com or Families.com. These websites belong to what we call the Display Network .

Google can automatically determine the locations where your ads should be shown by matching your keywords and Display Network websites. However, if you want better control over which sites your ads are shown, you can select specific placements yourself. You can set bids for each of them and choose the sites where your ads can run.

 

Ad Ranking: Google method to determine ad position

Now, suppose that many advertisers use the same keyword to trigger their ad or want their ads to appear on the same websites. How does Google identify the ads to be shown and their order of release? This decision is made automatically based on what Google calls the ad ranking.

The ranking of your ad is based on a combination of your bid (how much you are willing to pay per click) and the quality score (estimation of the quality of your ads, your keywords and your website). According to the locations where your ads are targeting, the formula for determining the classification of an ad may vary slightly. However, it is always a mix of the bid and quality score.

The quality score is described in more detail below. The key point to remember here is that the quality and relevance of your keywords, landing pages and your ad contribute as much to your ad ranking as the value that you are willing to pay per click.

About bidding and quality

Your bid and your quality may vary slightly depending on the type of campaign. Here are two examples:

In the case of ads on Google and on partner sites of the Search Network, your bid is the maximum cost per click, that is to say the maximum amount you are willing to pay for each click on your ad. Your level of quality is based on the relevance of your keywords, the quality of your landing page, the click through rate (CTR) of your ad and some other factors.

In the case of a placement-targeted ad on the Google Display Network using cost-per-a-a-thousand impressions (CPM) , your quality score simply depends on the quality of your landing page.

What you pay in the end

You always pay the lowest amount possible for the highest position you can get depending on your quality score and the value of your bid. 
You pay only the minimum required to beat the advertiser in the position immediately after you.

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