Absolute Beginner's Guide to Google AdWords - Part One

Published on: Sep 4. 2013

About the author

Also, we wanted to create a Google AdWords guide for our Webiny users, to help them get the best result out of their new or old website.


This guide is:

  • a collection of hands-on experiences
  • based on examples and real-life


This guide is not:

  • a how-to for specific campaigns
  • a magic wand that will help you get the result fast. 

You have to understand that every niche and every campaign has it’s own course and problems. With this guide we will try to help you to think out-of-the-box and reshape your campaigns for best results (also, it will help avoid common mistakes when setting up your campaigns).


This guide is for:

  • small business owners
  • entry level advertisers
  • business owners that have their own marketing team and need to understand what are they doing and what problems they encounter


This guide is not for experienced advertisers nor will it address some high level concepts like bidding strategies or large campaigns for enterprise users.

The reason search excels in marketing is that it's all about intent, and what's even better, it's about identified intent neatly labeled by the search query. In the history of marketing, it's never been easier than this to intercept a motivated buyer.

What is Google AdWords

Google AdWords is Google's online marketing and advertising platform. You can advertise on Google search engine result pages and other partner websites by using a "keyword based" system.

Google AdWords program is based on "Pay per Click" model (CPC), so you only pay when someone clicks on your ad. Google AdWords also offers "Cost per thousand impressions" model (CPM) and site targeted advertising for text, banner and rich-media ads.

Google AdWords on the SERP


So what are the main benefits of using Google AdWords?

  • using PPC yields, on average, five times stronger ROI than other online marketing channels
  • you get a much more targeted traffic than using SEO or Social Media Marketing
  • using PPC you brand your company while selling its offerings

How Google AdWords Work

Google AdWords is a bidding engine. The price of a click (CPC) is determined by number of competitors and their bidding. It was made to make money FOR GOOGLE, but if you know how it works, you can get great ROI on your campaigns.


The auction is a process that happens every time a Google search is performed.
Each time someone enters a query in Google, the AdWords system finds all the ads whose keywords match that search (keyword match type is important here). Of all these ads, those with sufficient Quality Scores and bids may be shown, ordered by their Ad Rank. Once an ad has entered the auction, AdWords look at two key factors to determine the position of the ad: the maximum bid and quality score.


  • Ad Rank = Max CPC Bid x Quality Score


Google AdWords make sure that you pay the minimum amount for the position you win if your ad is clicked on. So your actual CPC is calculated with the following formula:


  • Actual CPC = Ad Rank of the advertiser below you / Your Quality Score + $0.01


For example, let’s say three advertisers are bidding for the same keyword.

Advertiser A, with max CPC of $2.00 and a Quality Score of 10; Advertiser B, with max CPC $4.00 and a Quality Score 4; and Advertiser C, with max CPC of $6.00 and a Quality Score of 2.

Each advertiser gets its Ad Rank based on their max bids and Quality Scores:


  • Advertiser A” Ad Rank = 2 * 10 = 20
  • Advertiser B” Ad Rank = 4 * 4 = 16
  • Advertiser C” Ad Rank = 6 * 2 = 12


Their actual CPC is calculated using the Ad Rank of the advertiser below them and their own Quality Scores:


  • Advertiser A” Actual CPC = 16 / 10 + $0.01 = $1.61
  • Advertiser B” Actual CPC = 12 / 4 + $0.01 = $3.01
  • Advertiser C” Actual CPC = Pays the highest CPC


This example shows just how important a good Quality Score is, as “Advertiser A” pays the lowest CPC while his ad is shown in the first position. Guys at WordStream have a great infographic on how AdWords work.

Google AdWords Key Terms

Ad extension - an extension of your ads, showing additional info such as a map of your location, product image, click-to-call phone number, sitelinks, your seller ratings and others
Ad group - set of keywords, ads and bids. Each AdWords campaign consists of one or more ad groups.
Campaign - set of ad groups that share a budget, location targeting and other settings.
Conversion - valuable action on your website, such as a purchase or subscription.
Conversion rate - ratio of visitors who convert from views or visits into desired actions.
CPA (Cost Per Action) - pricing model in which an advertiser pays for specified action.
CPC (Cost Per Click)- pricing model in which an advertiser pays for every click on the ad.
CPM (Cost Per Mille) - pricing model in which an advertiser pays for every time his ad is displayed.
CTR (Click-through Rate) - metric used to measure the success of an online advertising campaign. It is defined as the number of clicks divided by the number of impressions.
Destination URL - URL address where the visitors are sent after clicking the ad.
Display URL - URL address that is displayed under your ad.
Impression - number of times an ad is displayed.
Keyword - word or phrase that describes your product or service, used to help determine when and where your ad should appear.
Placement - location on the Display Network where your ad can appear.
Position - order in which an ad appears on a page in relation to competitor ads.
PPC (Pay Per Click)- pricing model in which an advertiser pays for every click on the ad.
Quality Score - an estimate of how relevant an ad, keyword and landing page is to a person seeing the ad.
Remarketing - a feature that you can use to show your ads to people who previously visited your site.
ROI (Return On Investment) - measure used to evaluate the efficiency of an investment.


These are the basic Google AdWords key terms you need to be familiar with to understand before you start planning your first campaign.

Looking forward to your questions and comments and stay tuned for part two!


Lastest from our blog:

The Power of the Community

In the focus of recent feedback that I got, I think there is a need for me to justify some of the decisions we made while developing Webiny Framework.

Share & subscribe: