How Does Pay Per Click Work on Google?

Dan Baum

Account Coordinator, 7+ Years of Marketing Strategy and Guidance

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How Does Pay Per Click Work on Google? Blog Feature

Published on February 18th, 2019

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The first goal for every inbound marketer is to get their site to rank high on Google’s search engine results pages (SERPs).

Easier said than done, right?

Ranking in the top organic spot can entail a ton of work, and it helps to have extensive knowledge on how Google ranks a page.

And even if you do reach the coveted #1 position, you may lose it when Google inevitably releases an algorithm update that changes the rules of the game.

If you’re not a technical SEO expert, how can you get your content to appear on the first page of search engine results?

One avenue to consider is paying for that prime position with Google and Pay-Per-Click advertising.

Not only will you appear at the top of the SERPs, but you can gain invaluable insights on users who reach your site.

What Is Pay-Per-Click (PPC)?

Google-Ads-Example

Before getting into Google Ads specifically, it’s important to understand what PPC is and how PPC advertising fits into an overall successful marketing strategy.

PPC stands for pay-per-click, a model of internet marketing in which advertisers pay a fee each time one of their ads is clicked. Essentially, it’s a way of buying visits to your site, rather than attempting to “earn” those visits organically.

Simply put, the way PPC works is you set a budget (daily, monthly, whatever) for your ads on a given platform, such as Google or Facebook, and then pay when someone clicks on your ad.

There are other types of ads, such as pay-per-impression or pay-per-view of similar types of advertising, such as pay-per-impression or pay-per-view; all of which function on a user taking a desired action.

However, for the sake of time, we are going to stick with PPC for this article.

PPC ads can be especially useful for specialized, time-sensitive campaigns (events, promotions, etc.), to go after your biggest competitors, retarget users that have already been on your site, or even hyper-focus your efforts on localized markets.

When implemented alone, however, PPC advertising can become expensive and inefficient.

This is why we don’t want PPC ads to be our only interaction with users online. To be clear, it isn’t a replacement for your traditional organic SEO efforts, but it can help you boost the amount of qualified traffic that reaches your site.

How Does PPC Work?

Asking how PPC works is like asking how the economy works.

PPC is a broad category, which includes a wide variety of platforms and mediums. That being said, 99% of what you need to know can be broken down into two major categories: Google Ads and Social Media Ads. Let’s start with Google because it’s my favorite.

Google PPC Ads

In a PPC campaign with Google, you are paying Google to display your ads at the top or bottom of the traditional organic search results. Ads can also display across other sites through Google’s display network, but we will get to that later.

Google-Ads-Organic

When a user clicks on one of your ads, you pay whatever the current Cost Per Click (CPC) is, and that amount is taken from your daily budget.

The cost per click is determined by a variety of factors.

The biggest contributors being the volume and competition on whatever the given keyword is.

For example, if you want your ad to display when a user searches “sporting goods store”, you will pay a lot more per click as compared to when a user searches for “sporting goods store in New Haven CT.” This is because “sporting goods store” is a much more frequently searched keyword than a keyword geared toward a local market.

Google will continue running your ads until enough people have clicked your ads that your daily budget is depleted. At that point, Google will stop displaying your ads until the next day, or until such time as you give them more budget to use.

Google shows ads in a variety of ways, including Search Ads, Local Ads, Display Ads, and Remarketing.

Search Ads

Search ads are the most common, most visible, and most utilized form of PPC by companies globally.

These ads appear above or beside organic results, based on whatever the user queries.

Here’s an example:

Google-Ads-Ad

So, if a user searches for the product or service you offer, your ad can be the first thing they see. And you only pay if they click on the link.

To set up a search ad, you start by telling Google when, where and why to display your ad. This involves not only writing your ad but also selecting the keywords a user needs to search in order for your ad to show.

Google lets you bid on specific keywords. When a user searches one of those keywords, Google runs a mini-auction between you and the other advertisers who are bidding on that keyword. The highest bidder wins!

This process is not as easy as it might sound. Getting it right requires fine-tuning your keywords and adjusting your budget so that you make the most of the money you’re spending. There are also a lot of other factors Google takes into account when deciding which bid wins. We’ll get there though, don’t worry.

Local Search Ads

Local, or location-specific ads, are a subset of standard search ads. These ads target users in a defined area, users searching for businesses near yours, or on Google Maps. They can also drive users to your Google My Business page, which is essentially a profile of your information that determines what shows up in local Google queries, Maps, etc.

By default, Google will set your search campaigns to air nationally unless your change where your ads display. So if your company has a defined service area or only delivers to certain places, make sure your campaign’s reach is well defined by using Location Targeting.

Google-Local-Ads

Google’s Display Network

The Google Display Network (GDN) isn’t quite the same model as traditional search, but can still reach a broad audience. These ads take advantage of both text and creative advertisements to display across millions of third-party websites and thousands of apps.

Google-Display-Network-FoodNetwork

Setting up a display campaign involves generating the creative assets for the ad format you choose, defining the audiences you want to target, and budgeting similarly to how you would with search ads.

Remarketing or Retargeting

How many times have you gone to a company’s site, left, and then almost everywhere you look you see ads for that company or the product you were considering purchasing? That’s an example of a remarketing campaign.

Remarketing-SEMRush

In my case, I see SEMRush ads all the time. I’m on their site constantly and regardless of how often I visit, I still won’t pay for an account because I’m able to make use of IMPACT’s corporate subscription. SEMRush doesn’t know I have access to their product, so their remarketing efforts get an A+.

One of the most common and practical uses of Google Display Network is for remarketing. Remarketing ads are shown to people who have visited your website or mobile app in the past. These ads can help you stay top of mind and reconnect with visitors who have expressed interest in your brand but haven’t necessarily become a customer or converted into a lead on your site.

An added benefit? Advertisers who target users who have already made a connection with their brand and site generally see higher click-through and conversion rates.

YouTube Ads

Ads that appear on YouTube are actually managed on the Google Ads platform and are served before during or after the videos you stream.

YouTube-Ad-Example-FarCry

Like any other ad, they will be targeted based on a user’s previous activity and interests as well as the content of the video on which it appears.

YouTube is a great ad choice because the keywords are relatively less expensive to target than in traditional Google Search.

Views cost an average of $0.06 per click on YouTube, compared to the average Google Search cost per click, which is estimated to be between $1-2.

Social PPC Ads

Google ads reach around 98% of the web, but social media PPC ads allow you to get your product in front of hyper-segmented audiences while they are browsing, NOT while they are searching for something on Google.

The biggest player when it comes to social media ads is Facebook, with a billion and a half users. Facebook (and by default Instagram, which is owned by Facebook) ads offer powerful targeting options and are a great fit for B2C and eCommerce companies.

LinkedIn offers enhanced audience segmentation for B2B industries, but it is considerably more expensive than Facebook or Google.

I could write for days about all the PPC options on social media too, but for the sake of time, I’ll continue with Google Ads. Check out these other articles for more on Facebook, Instagram, and LinkedIn PPC advertising.

When (and Why) You Should Use Google Ads

Simply put, 75% of search engine clicks happen on the first page of Google’s SERPs, and ads give you more opportunities to appear on the front page of a search result. Not only that, but 64% of people click on Google ads when they are looking to buy an item online.

Before we get into when you should invest in Google ads, let’s start with why you shouldn’t.

When It Does Not Make Sense To Use Pay-Per-Click Advertising

I cannot stress this enough, but Google ads and PPC, in general, should not be viewed as n easy, “Hail Mary” marketing move when all else fails.

There is a learning period to Google ads, so marketers who are desperate for more leads and traffic generally fail, when they should be spending budget to improve those numbers organically.

PPC is not a silver bullet and doesn’t work for everyone. You might want to consider other avenues if:

Strict Industry Ad Rules/Controversial Keywords

Not only do you need to be wary of rules and compliance within your industry, but Google has its own policies you have to think about. Industries like healthcare, financial services, alcohol, and tobacco are highly regulated when it comes to Google ads.

Google also has limits on what you can say in your ads or on your landing pages. For example, the term “clinical trials” is not allowed in ads anywhere but the US.

There are other rules involving medical products, alcohol, trademarked content, and political content that might make it difficult to develop ads that meet Google’s stringent compliance requirements. Here is a full list.

If You Don’t Have the Time

Even though Google makes it easy to set up and run campaigns, you can’t “set it and forget it” when it comes to your ads.

You need to be in your account making modifications to your campaigns daily. Otherwise, things can go sideways fast and you could spend a lot of money on ads that don’t deliver the desired results.

When You Should Use PPC with Google: Press Fast Forward on SEO

Search engine optimization (SEO) done right can take a considerable amount of time. From when you start creating content and optimizing your site on the technical side, it can be months or years before you start seeing boosts from traditional SEO efforts.

Supplementing this process with Google ads can help bridge that gap. From the time you hit publish, your ads appear on the search engine results pages and you can start getting instant brand awareness, clicks to landing pages, and even conversions.

Promote New Offerings/Products/Promotions

Unveiling a new product? PPC is a great way to start generating the buzz you need come launch time.

Move Over Competitors

Sometimes the little guys need help establishing themselves as a serious contender amongst big, national brands. If you know there is no way you can compete with bigger brands organically, compete with them with PPC.

Now you might be saying, “well if they are bigger brands, they can just outbid me”. That might be true on the highly trafficked keywords. High volume keywords are all the bigger brands care about because they can afford to. Long-tail keywords, in turn, will still be ripe for the picking for your smaller brand. With longer-tailed keywords, the traffic you are bidding on will be more qualified too.

How to Get the Most Out of PPC

Google Ads make it easy to get up and running, but not taking the time to strategize can lead to a lot of wasted budget. Go in with a plan before you start with Google Ads.

Here’s a simple process that will get you started on the right foot.

1. Create Goals

So many teams go into Google Ads without knowing what they are trying to accomplish. Every campaign you create needs to have a goal along with it so that you know how your efforts are performing.

Before you set up your ads, ask yourself the following questions:

Who is Your Audience?

Get into the mindset of whom you are targeting with your campaign. When coming up with keywords and ad copy, do your research and select words and phrases that your audience would search. Tailor your ad copy to fit those needs. Make sure the page you are sending users to aligns with what they are searching for and matches what your ad says.

Not only will this improve your metrics and your ROI, but Google Ads will reward you for providing the most relevant content possible. This means a lower overall CPC and more clicks/impressions for the same amount of budget. More on that in a bit.

What Does Success Look Like?

Why are you running this campaign? Are you just trying to create brand awareness? Do you need more leads? Are conversions most important? Defining the goal of the campaign affects the strategy of the ads you are running.

How Will You Measure Your Results?

The biggest thing we see when looking at client ad accounts is a “lack of accountability” when it comes to tracking and measuring results. My recommendation? Don’t even begin to run ads if you’re not in a position to measure the outcomes of them.

A few things to make sure are in place:

  • Ensure that Google Analytics, Google Ads, and Google Search Console tracking codes are on the site

  • Ensure that Google Analytics, Google Ads, and Google Search Console are all connected

Taken together, these things allow you to track users from start to finish and attribute customers/conversions to your ads. Knowing what terms users are searching for, where they are coming from, and what they want to do when they get to your site is vital to the success of your campaign. The key here is to work with clean data.

Ongoing analysis of your campaign metrics will reveal ads and keywords you may want to pause, rework, or promote with additional budget, depending upon their performance.

2. Create Your Campaign

When brainstorming for your campaign, don’t be afraid to experiment.

First off, you need to decide on a structure for your campaign.

Keep things simple, but keep them specific to the goals you established above.

Each campaign is made up of different groups of keywords called Ad Groups. These are where your ads live.

An ad group is a set of ads and a set of keywords you want to serve those ads for.

For example, if you were running a campaign for some headphones you were selling, you would want to have an ad group with keywords related to headphones, and another related to earbuds.

These are two different clear subgroups that users can search in, and they should be bid upon separately.

When it comes to keywords, there are 3 main types that you can use within your ad groups:

  • Broad Match - Broad Match keywords is the default match type to which all of your keywords are assigned. When you use broad match keywords, your ads may show on searches that include misspellings, synonyms, related searches, and other relevant variations of the keyword or phrase you are targeting. So if your keyword is “women’s hats,” someone searching for “buy ladies hats” might see your ad. These keywords have a lot of monthly traffic but are more competitive and non-specific, so your ad is more likely to be shown to unqualified users.

  • Phrase Match - With phrase match, the query needs to contain the keyword you have specified, but can also have additional keywords before or after the phrase. For example, if your phrase match keyword was “women’s hats,” your ad could show if someone searched “buy red women’s hats near me”, but not “buy women’s red hats near me” because the phrase is broken up by the word “red”. These keywords are a good middle ground because they target a more specific, and therefore more qualified, audience than broad match keywords.

  • Exact Match - In this case, the searcher’s query needs to match your keyword almost exactly for the ad to show. These keywords typically have the lowest cost per click but also have the lowest search volume. These keywords should only be used once you have significant data in your account. This way only the most qualified traffic are seeing and clicking on your ad.

When it comes to keyword targeting, a good rule of thumb is to keep things as specific as possible. We generally advise clients to only put keywords into these lists that appear within their ads and within their landing pages.

My mantra? Relevancy, relevancy, relevancy. The more relevant your ads/landing page are to the keywords in your list, the better your quality score.

Your quality score is the single most important metric to keep an eye on within your campaign. Google calculates your quality score based on:

  • Your click-through rate (CTR).

  • The relevance of each keyword to its ad group.

  • Landing page quality and relevance.

  • The relevance of your ad text.

  • Your historical AdWords account performance.

Bottom line: The more relevant a keyword in an ad group is to the ad copy and landing page copy, the better your campaign will perform and the cheaper it will be.

As for your actual ad copy, here are the different components you’ll need to come up with:

  • Headline 1 - 30 characters max

  • Headline 2 - 30 characters max

  • Headline 3 - 30 characters max

  • Description 1 - 90 characters max

  • Description 2 - 90 characters max

  • Path 1 - 15 characters max

  • Path 2 - 15 characters max

Google-Ad-Creation

What we like to do is a brain dump a list of keywords, headlines, and descriptions that we can use as a sort of “bank” for current and future campaign ads.

Once you have ad copy, it’s time to decide on an overall structure for your campaign.

I’m a visual learner, so I like to outline these in LucidChart.

Check out this sample campaign structure from our friends at Ground Up Construction:

Google-Ads-Structure-Ground-Up-Construct

These guys help connect construction workers and companies together with laid out career paths. Each one of those green boxes is a campaign, and the yellow ones are ad groups. Each ad group has its own list of specific keywords for which we want to display ads.

3. Don’t Use Google’s Default

One of the great things about Google Adwords is that the tools are designed to be easy to navigate and use, with clear tutorials and default settings for most options.

On the outside, it’s a simple process. Just make your ads, choose your targets, and set your budget.

Not so much.

Your account is going to need some fine-tuning in order to work as efficiently as possible and get the most out of your budget.

For instance, Google wants you to make full use of everything they offer in their network. This includes AOL, Ask.com, and full GDN. It’s best to avoid advertising on GDN until you have some good data in your account.

Why? GDN will display your ads EVERYWHERE, giving you plenty of impressions, but skewing your results and delivering very low CTR.

Want better results? Spend your budget on Google. Just Google. (At least to start.)

Google will also set your campaign defaults to use “Enhanced CPC”. This uses machine learning to automatically adjust your maximum bids based on location, time of day, and audience.

The problem with Enhanced CPC is that the machine learning algorithms don’t know anything about your account yet, so they can waste a lot of budget up front. My advice? Move everything to Manual CPC when first starting a campaign/ad account.

4.  Other Factors To Consider

There are other things to keep an eye on while running your campaign besides your quality score. Here are a few we like to track:

Relevance… Again

It bears repeating. Keep your keywords, ad copy, and landing page content-relevant. There needs to be a clear and obvious connection between them all, or else your ad results will suffer.

Landing Page

Besides relevancy, your landing page needs to be optimized for conversions. The best ad strategy in the world will fail if it sends users to a poor quality landing page. And with mobile-first indexing, make sure the page is optimized for all devices!

Budget & Projections

Keep in mind that you will be bidding against your competitors. The higher the demand for a keyword, the more it is going to cost.

And if your competitor has a bigger budget or a higher quality score, their ad is going to show. This isn’t to say that small budgets can’t perform well with Google Ads - just that you need to be more strategic and specific on how you use that budget.

What Results Are Typical?

When used effectively, PPC advertising can be an incredibly effective way to reach new audiences and bring in new customers. Unbounce found that PPC visitors are 50% more likely to purchase something from a site than organic visitors.

With that being said, there is really no way to predict the success of your specific campaigns without trying them out first and gathering your own data.

There is, however, data published by Google that showcases the overall success of Google Ads.

According to Google, businesses typically make an average of $2 in revenue for every $1 spent on Google Ads. They also say that for every ad click a business receives, they get 5 more organic clicks.

Based on that data, Google’s Economic Report says that for every dollar spent in ads, there is a long term average of $8 made for that company.

Now before you pull the plug on Google Ads or fire the guy managing your account for not getting an 8x return on ad spend, this can vary drastically based on the location, industry, and age of your company.

This is also an average taken over the long term of company ad campaigns. It could take years before the 8x impact of that $1 spent is fully felt.

PPC ads can be used by almost any type of company to get better marketing ROI if done right. So now that you know the basics of Google Ads and PPC Advertising, you can make an educated start for your brand’s paid presence online!

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