If you want to learn to use Google Ads to advertise your business, there is a significant learning curve. It’s not that hard to get campaigns running, ads showing, and costs accruing. But actually knowing what you’re spending your money on is tough! Becoming fluent with the various options and features takes a lot of study and practice. If you do put in the time and practice, though, you will know how to get much more value for every dollar you spend on ads.

This article explains just six principles and concepts that are best to grasp as soon as possible.

1. What Google Wants

When running ads through Google, it’s important to understand that there are always three parties that should benefit from the process:

  1. The advertiser
  2. Viewers of the ads (finding what they are looking for)
  3. Google

Google wants a win-win-win. If there are only one or two wins, the advertising approach is not successful.

Understanding that Google needs to benefit goes a long way toward understanding how the Google Ads platform works. Since it’s mostly a PPC (pay-per-click) system, guess what Google wants you to get… Clicks! That’s how they make money. They don’t want you to create bad ads or ads that are shown to the wrong audience. That decreases the likelihood of clicks on the ads. Quality and relevance mechanisms are built-in to detect if you are on the right track or the wrong one as an advertiser. If you are on the right track, you will be rewarded with more ad exposure and lower costs per click. If you are on the wrong track, you will be penalized with less ad exposure and higher costs per click.

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2. Where the ads Appear

People see ads through Google in a number of different places. Knowing what the major channels are for ad distribution will help you avoid confusion as you create campaigns. It will also help you understand what opportunities are available that could help your business get exposure. Some of these channels have a variety of sub-channel or “placement” options in themselves. For example, YouTube offers the ability to show video ads before other videos; when specific keywords are searched; or simply as static images that appear over video content.

In the big picture, Google offers advertising exposure over the following channels:

YouTube – the massive, Google-owned video platform

Google Display Network – websites and mobile apps that show ads next to content

Google Search – Google’s search engine on the web, in mobile apps, on Home devices, and more

Gmail – Google’s email platform

Google Maps – Google’s hugely popular maps service

These channels are very different from each other, and they serve many different purposes. Advertisers should understand what they are and how people use them. Which channels to use for ads depend on what types of products or services are being offered, the goals of the campaign, the costs involved, and how to reach the right people.

3. Budget/ Controlling Spend

If you’re new to Google Ads, you’ll undoubtedly be interested to know how you can control the amount of money that gets spent. Each campaign you create can have either a daily budget or a lifetime budget. For example, you can choose a daily budget of eight dollars for an ad to run for the foreseeable future (until you choose to pause or remove it). Or you can choose a lifetime budget of one hundred dollars to be spent over a specified time period (such as two weeks). By default, Google will set pacing that spreads out the appearances of your ad over time so that your budget doesn’t get used up all at once.

There is no minimum budget for Google Ad campaigns; however, if the budget is too small, it’s possible that the ads will not show. Budget is a factor in the competition between ads for visibility. There must be enough to spend in the auction (see below).

Google Ads can sometimes spend more than your daily budget in a single day. This can be shocking and frustrating. But you will not be charged more than your daily budget multiplied by 30.4 (the average number of days in a month) in any given month. So while it might spend more on a particular day, it will make up for it by spending less on another day (or days).

Your campaign budget can be changed at any time. There is no limit to how often you can decide to change it.

Google Ads also offers a shared budgets feature, where more than one campaign can share a budget. This can be useful if you want to be sure to spend the full amount. For example, if one campaign doesn’t get enough clicks to spend more budget, another campaign can make up for it by spending more.

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4. It’s an Auction-Based System

One of the most complex and ingenious aspects of Google Ads is that it’s an auction-based system. For your ads to get exposure, you’ll place a bid on the maximum you’re willing to pay for a specified outcome (see Bid Strategies below). For example, you might tell the system that you’re willing to pay up to three dollars and thirty cents for a click in Google Search for people searching, “bicycle store near me.” Then, when someone in the targeting area searches those words, Google Ads will instantly compare bids among the competing advertisers to help determine which ads will appear and in which order. Fortunately, the amount the advertiser pays for the click is usually lower than the maximum bid amount they set. They will only be charged the minimum necessary (one penny) to outrank the advertiser in the ad below.

5. Bid Strategies

As mentioned above, Google Ads is an auction-based system. Advertisers need to bid for their ads to appear. Options for bidding are in the settings panel of the campaign. The bid strategy you choose should relate to your goals for the campaign and the results you’d like to achieve. This is an area that’s become much more sophisticated over the years with Google Ads. Machine learning now aids in the process of auction bidding so that there’s a higher chance of success with each individual auction. For example, the system might determine that certain times of the day, certain types of mobile devices, or particular placements tend to get better results, so bidding can be increased in those instances. Or the opposite can be true. Perhaps the system detects that people from a certain location area don’t convert much. Bidding in the auction can be decreased in those cases.

There are currently four categories of bid strategies:

Focus on conversions (a.k.a. Smart Bidding)

This is the most sophisticated and automated type of bidding. With this approach, you tell the system to control bidding in each auction in order to achieve the result you want. For example, you can say, “Google, try to get me conversions at a cost of $45 each.” This involves setting a Target CPA (cost-per-action). Other options include: setting a Target ROAS (return-on-ad-spend), Maximize Conversions, Maximize Conversion Value, and Enhanced Cost-Per-Click (ECPC).

Focus on clicks

If you simply want to focus on getting clicks on your ads, there are two bid strategies to choose from: Maximize Clicks tells the system to get as many clicks as possible for your budget, and Manual CPC gives you the ability to set your own bids for each keyword in the auction (thereby forgoing any bid automation).

Focus on visibility

You can choose a bidding strategy that focuses on the visibility of the ads rather than conversions or clicks. This could make sense if branding is your goal, as opposed to direct response. CPM bidding is when you bid the maximum you’re willing to pay for one thousand impressions of your ad (it’s only available for ads showing on YouTube or the Google Display Network). Other types of bids that focus on visibility are Target Impression Share, tCPM (Target CPM), and vCPM (Viewable CPM).

Focus on views or interactions (for video ads only)

With CPV (cost-per-view) bidding, you bid the maximum you’re willing to pay for someone to watch at least thirty seconds of your video ad OR take an action, such as click on the link associated with the ad.

6. What you get Charged for

What you get charged for by Google is related to your bidding option, but it’s not always the same thing. For example, if you choose CPA/Smart Bidding, you’ll bid for what you’d like to pay for conversions, but you’ll be charged per click on the ad, regardless of how successful the smart bidding turns out. The smart bidding option simply applies machine learning on an auction-by-auction basis. It doesn’t change the fact that you are being charged per click.

When it comes to being billed by Google Ads, each campaign would be charged in one of the following ways:

  • Per click on an ad or ad extension (CPC/cost-per-click)
  • Per one thousand impressions (CPM)
  • Per video view or interaction (CPV/cost-per-view)