Google Ads operates under a pay-per-click (PPC) model. That means marketers target a specific keyword on Google and make bids on the keyword — competing with others also targeting the keyword.
The bids you make are “maximum bids” — or the maximum you’re willing to pay for an ad.
For example, if your maximum bid is $4 and Google determines that your cost per click is $2, then you get that ad placement! If they determine that it’s more than $4, you do not get the ad placement.
Alternatively, you can set a maximum daily budget for your ad. You’ll never spend more than a specific amount for that ad per day, helping you get a better sense of how much you should budget for your digital ad campaign.
Marketers have three options for their bids:
Cost-per-click (CPC). How much you pay when a user clicks on your ad.
Cost-per-mille (CPM). How much you pay per 1000 ad impressions.
Cost-per-engagement (CPE). How much you pay when a user performs a specific action on your ad (signs up for a list, watch a video, etc).
Google then takes the bid amount and pairs it with an assessment of your ad called a Quality Score. According to Google:
“Quality Score is an estimate of the quality of your ads, keywords, and landing pages. Higher quality ads can lead to lower prices and better ad positions.”
The score number is between 1 and 10 — with 10 being the best score. The higher your score is the better you’ll rank and the less you have to spend converting.
Your Quality Score combined with your bid amount creates your Ad Rank — the position your ad will appear in the search results page.
And when a user sees the ad and clicks on it, the marketer pays a small fee for that click (thus pay-per-click).
The idea is that the more users click on a marketer’s advertisement, the more likely they will accomplish the advertisement’s goals (e.g. become a lead, make a purchase).
Now that you know how Google ads work, let’s take a look at the different types of Google ads you can use for your campaign.
Types of Google Ads
Google offers a variety of different campaign types that you can use: