Google Ads (Part 1) – What They Are and How They Work

Have you searched for anything online in the past week? Of course you have. People are searching all of the time and when they start searching for a business or organization like yours, you want to show up to increase their chances of them doing business with you.

You especially want to make sure your business shows up at the top to increase their chances of seeing and doing business with you. That’s where Google Ads come in and they’re important to an online strategy to help you drive traffic and business.

Stats show that 49% of people click on text ads and 75% of people say paid search ads make finding information easier.

Additionally, for every $1 spent on Google Ads, businesses earn an average revenue of $2. 75% of people who find local, helpful information in search results are more likely to visit the physical stores.

With that ROI in mind, here’s the basics so you can understand what Google Search Ads are and how they work. (In subsequent posts, we’ll share best practices for creating Google ads, how to maintain and manage ads over time, and tips and strategies to help you be successful.)

What Google Search ads are and how they work

When someone performs an online search, Google looks at the term or phrase and through their algorithms, it returns results that best match what the user was searching for, including paid and organic results. Paid ads will display at the top, while organic or natural results will be down below based on the relevancy to the search terms. Because paid ads show at the top, this increases the chance of people clicking through and eventually doing business with you. Paid ads really help you to compete in a busy marketplace to reach the top of the search results.

It’s also important to remember that a good chunk of clicks go to the first three paid ads in the results.

The way it works for you as an advertiser, is that you essentially bid on those search terms that relate to your business or industry. Every time someone performs a search, Google looks at all of the advertisers and chooses “winners” to appear in the advertising space at the top of the results. The winners are chosen based on a variety of aspects such as the relevance of the keywords, landing page, and the quality of that page as well as the price of the keyword bid.

Google Ads work on a pay-per-click or PPC basis, so you will only pay when someone clicks and goes to your website.

Google Ads are effective because they allow you to target the right audience through the most relevant keywords and phrases that relate to your business and industry. Plus, you can reach the right audience because you can target them based on their location which is especially important if you are a local business with a physical location.

People who are searching on Google are searching with intent, meaning they are more likely to purchase.

You pay on a cost per click basis which means that you can make them work with just about any budget. You can set a daily budget that you won’t exceed. These types of ads are flexible and that’s because you can run them whenever you need to. Plus, you have the potential to start getting results as soon as your ad goes live.

Bet you’re thinking, “What does it really cost to run a Google Ad?”

Answer: It varies by industry.

The average cost per click across all industries is $2.41, but it really does depend on the industry that’s because Google Ads uses a bidding system based on the popularity of keywords or phrases for the ads. So those that are searched for the most are typically going to be more expensive and that all relates back to that bidding system mentioned above.

To better illustrate what we are talking about with the average cost per click for a few industries, see the graphic:

We can see that the dining and nightlife industry has the lowest cost per click at about $1.30 and those in the law and government industry is the highest at $6.35 per click. Because of the bidding process, the cost per click is different for each keyword, which in turn makes more popular keywords more expensive.

Google Ads can be used for any type of business or organization. Anyone including business to consumer companies that have a physical location such as a restaurant or a store, business to business companies offering products or services, and even nonprofit organizations. Here are just a few examples of some Google Ads you might think about.

You can use an ad to help you drive traffic to your website, blog, or to a landing page to help you accomplish just about any goal.

In the first example, they’re promoting a limited-time menu item. In the second, promoting the shelter by helping people find the right dog for their family and encouraging people to sign up to get a free adoption guide. And then, this last one is encouraging people to schedule a call so that they can get help with their business’ marketing.





Now, when you’re ready to start creating your ad, it’s important to spend a little time planning. Think about

  • your end goal and an action that you’ll want people to take in order to accomplish it.
  • who specifically you’ll want to target for your ad so you’ll have the best opportunity to get your message across and encourage them to take the final action you want.
  • the budget you’ll want to spend.

The business or industry you’re in can greatly affect the overall cost, but think about how much you can designate on average daily for your budget. Some days might have better performance and clicks and others may be lower but you’ll never exceed the budget you set over the course of the month. When you use the Google Ads tool in Constant Contact, you really only need to focus on setting a budget that you won’t want to exceed because the tool uses some artificial intelligence to place competitive bids on the keywords you choose.

A look at the ads again and see some suggestions for starting budgets. These are just some examples that help to show the differences in cost and what you might want to budget for a particular type of ad.

For this first example for Jack’s Backyard BBQ you might start with a daily budget of $15 which would add up to about $456 per month. Remember, the end cost is based on cost per click which in this case, you might expect somewhere around $.50 per click for the related keywords. And with that budget you might expect about 912 clicks.

For the nonprofit, a good starting budget could be around $15 as well. In this case, we could expect about $1.50 for the cost per click, so a little higher than the last because of the keywords. In this case, we might expect about 304 total clicks.

In this last example for French Consulting for a business to business organization, we might expect a cost per click of $1.19 for a daily budget of $15.

Now, I know that seems like a lot, but let’s just take a look at what you would need in these examples to just cover those costs. For the BBQ restaurant, if the average order is $25 that would mean that we only need 19 customers from this ad just to cover the cost. Thinking about it that way is a little more doable. That equates to just one more customer a day.

Obviously, you’ll have a lot more impressions and clicks, but that would be the number you need to hit, just to cover the cost of the ad.

For the animal rescue, if the cost for people to adopt a dog is $250 then you would need only 2 people from that ad to come in to adopt in order to cover the costs.

Then for this last example. If we say the average monthly service cost per client is $450 then 1 new client would cover the costs of the ad.

Now obviously, this doesn’t tell the full cost story. It’s going to take a lot more impressions and then actual clicks to get these results, but once you think about it like this, it looks a more attainable.

More familiar with what Google Ads are and how they work? In subsequent posts, we’ll share best practices for creating Google ads, how to maintain and manage ads over time, and tips and strategies to help you be successful.

How to know when these articles are posted? Sign up for the BTY Brief. Twice a month we email new articles like these and compilations of other great reads we find. Go HERE to sign up.

Also follow us on social media. You’ll see the post or tweet about the other articles in this series on Google Ads. Follow Facebook here. LinkedIn here. Twitter here.