What Are Google Ads and How Do They Work to Improve Finances?

You've probably heard of Google Ads, which was formerly known as Google Adwords. Maybe you even tried it once with little success. It can feel like a money pit if you don't fully grasp the system, which is why so many people ask: what is Google Ads and how does it work? It's a question many business owners, especially in specialized B2B fields, ask themselves, and they need a straightforward answer, not a lot of confusing tech speak.

The goal is to see if this powerful tool can actually bring you the right kind of customers. Understanding what is Google ads and how it works is the first step to making it work for you.

Think of it like this. People use the Google search engine for everything. They ask questions, look for solutions, and search for specific services every single second. This platform lets you put your business right in front of them at the exact moment they're searching for what you offer, which is an incredibly powerful way to connect with potential clients.

Take this short 2 minute quiz and learn what your potential ROI is from Google Ads.  Discover how to maximize your Google Ad Spend for maximum profitability!

Understanding Google Ads: Beyond Just Clicks

At its core, Google Ads is an online advertising platform. You pay to have your advertisements shown to people using Google. These ads appear in various places, including Google search results and on other websites that are part of the Google Display Network.

But it's much more than just paying for visibility. It's about precision targeting. You can choose who sees your ads based on the keywords they use, their location, age, and even their interests. This means your advertising budget is spent on people who are more likely to become customers.

What is Google Ads and How Does It Work?: The Ads Auction System

The system that determines which ads are shown runs on an auction. This doesn't mean the advertiser with the highest bid always wins the top spot, though. The Google Ads auction is a bit more clever than a simple highest-bidder-wins system.

Every time someone performs a search on Google, an incredibly fast ad auction takes place. Google looks at all the advertisers who want to show an ad for that specific search query. It then decides which ads to show and in what order based on a factor called Ad Rank.

Your bid amount is important, but it's only one piece of the puzzle. Google combines your bid with your Quality Score to determine your Ad Rank. A higher Ad Rank means your Google ad gets a better position, and you might even pay less per ad click than your competitors.

What is Quality Score?

Your Quality Score is Google's rating of the quality and relevance of both your keywords and your ads. It's measured on a scale from 1 to 10. A higher score is better for your ad campaigns and can lead to lower costs and better ad positions.

It's made up of three main components:

1. Ad Relevance: How closely does your ad's message match the keywords someone is searching for? If someone searches for "SAP financial consulting," an ad about SAP financial services is highly relevant. A generic ad about IT support is not, and will likely receive a lower score for relevance.
2. Expected Clickthrough Rate (CTR): This is Google's prediction of how often your ad will be clicked when shown. Google uses past performance data to figure this out. A compelling ad copy that speaks to the user's needs gets more clicks and a better score.
3. Landing Page Experience: What happens after someone clicks your ad? The page they land on should be relevant to the search term, easy to use, and provide the information they were looking for. According to Google's own guidance, a great landing page experience is critical for a high Quality Score.

A good Quality Score can significantly lower your Google Ads cost and improve your ad position. This is why you can't just throw money at an ads campaign and expect results. You need a thoughtful strategy focused on quality and relevance.

What is Ad Rank and How Does It Affect the Ads Cost?

Ad Rank is the value that determines your ad's position on the search result page. The formula is simple: your Ad Rank equals your maximum bid multiplied by your Quality Score. A higher Ad Rank leads to a better ad position, meaning you are more likely to appear at the top of the page.

A common misconception is that you pay your maximum bid for each click. The actual price you pay is just enough to beat the Ad Rank of the advertiser below you. This means a high Quality Score can allow you to win a higher position at a lower cost per click than a competitor with a lower Quality Score, even if they have a higher maximum bid.

The Different Types of Google Ads Campaigns

Google Ads isn't just one thing. It's a collection of tools that let you advertise in different ways through a Google Ads campaign. Picking the right ad campaign type depends on your specific goals and business model.

Search Ads: Capturing Intent

These are the text ads you see on the Google search results page. They are probably the most well-known type of Google Ad and are a form of pure intent-based marketing. Search ads work by targeting specific keywords that users type into the Google search bar.

Someone is actively looking for a solution, product, or service. For a company offering SAP help, a search ad triggered by "SAP S4 Hana finance implementation" gets in front of a very motivated buyer. This is what makes Search Ads so powerful for B2B services, as you connect with users at the exact moment of a relevant search.

Display Ads: Building Awareness

Have you ever seen banner ads on a news website or your favorite blog? Those are likely part of the Google Display Network. The display network includes millions of websites, videos, and apps where your visual ads can appear.

Google Display Ads are more about getting your name out there. You aren't catching someone in the moment of searching, but you can target them based on their interests, demographics, and online behavior. Display ads google are a great way to build brand awareness so that when they do need your service, they remember your name.

Video Ads: Telling Your Story on YouTube

YouTube is owned by Google, and it's the second-largest search engine in the world. With video ads, you can show advertisements before, during, or after YouTube videos. You can tell a deeper story with a video ad than you can with just text.

You could create short video ads explaining a common financial reporting problem that SAP helps fix. This shows your expertise and connects with potential clients on a different level. It's fantastic for demonstrating complex services in an easy-to-understand way.

Shopping Ads: A Must for eCommerce

If you sell physical products, Google Shopping ads are essential. These are the product listings with images and prices you see at the top of a search results page or in the shopping tab. A shopping ad gives shoppers quick information to help them buy directly.

To run shopping ads, you need to set up a Google Merchant Center account. The Google Merchant account is where you upload your product feed, which contains all the details about the products you sell. This information from the merchant center is then used to create the shopping ads google automatically shows to interested buyers.

Although they seem built for B2C, a shopping ad campaign can work for B2B companies that sell tangible products, like specialized hardware or software licenses. It is less common for service-based businesses but remains a powerful ad format.

Performance Max: The All-in-One Approach

A Performance Max campaign is a newer campaign type. This max campaign lets advertisers access all of Google's channels from a single campaign. You provide Google your creative assets like text, images, and videos, and its machine learning does the rest.

It automatically shows your ads across Search, Display, YouTube, Gmail, and more. The goal of a Performance Max campaign is to find you more converting customers across all of Google's channels. It can be powerful, but it gives you less manual control than other campaign types.

App Ads: Driving Installs and Engagement

For businesses with a mobile application, an app ad campaign is the way to go. These ads are specifically made to drive app installs and in-app actions. Your ads app can run across Google Search, Google Play, YouTube, and the Google Display Network.

You provide some text, a starting bid, and a budget, along with some assets like images or videos. Google then uses this information to create various ads in different formats. The system then targets users who are most likely to be interested in your app.

How to Structure Your Ads Campaign for Success

A well-organized Google Ads account is foundational for good performance. The structure is hierarchical: Account > Campaign > Ad Group. Each ad group contains a set of related keywords and ads.

For example, an SAP consulting firm might have an ad campaign focused on financial services. Within that ads campaign, they could have one ad group for "SAP cost optimization" and another for "SAP financial reporting." The ad copy in each ad group would be specific to those keywords, improving ad relevance and Quality Score.

The Role of Keyword Match Types

When you add keywords to your ad group, you must choose a keyword match type. Match types give you control over which search queries can trigger your ad.

The main match types are:

• Broad Match: Shows your ad for searches that are related to your keyword, including synonyms and variations. It offers the widest reach but the least control.
• Phrase Match: Your ad appears for searches that include the meaning of your keyword. It is more focused than broad match.
• Exact Match: Shows your ad for searches that have the same meaning or intent as your keyword. It gives you the most control over who sees your ad.

Using a mix of match types and regularly reviewing the search terms report is important. This report shows the actual search queries people used before seeing your ad. You can add irrelevant search terms as negative keywords to prevent your ads from showing for them in the future, which helps focus your ad spend.

The Power of Ad Extensions

Ad extensions are extra pieces of information you can add to your ads, like a location, sitelinks to other pages, or a phone number. They make your ad bigger and more useful to users, which often increases your clickthrough rate. Because expected CTR is a component of Quality Score, ad extensions can indirectly improve your Ad Rank and lower your ads cost.

Google Ads vs. SEO: Friends, Not Foes

Sometimes people see advertising and search engine optimization (SEO) as a choice. Should I pay for an ad click or invest in creating content to rank organically? The best answer is usually both.

SEO is about earning your place in search results over the long term. It builds trust and authority. But it can be slow, sometimes taking many months to see results from your efforts.

A Google ad campaign is immediate. You can start getting traffic and leads from the day you launch your ad campaign. It gives you quick feedback on what messages and offers work, and you can even use tools like Google Optimize to test landing page variations. You can then use the data from how your ads work to make your SEO strategy better.

Using them together is a powerful combination. Ads can get you leads today, while SEO can build your foundation for sustainable traffic for years to come. This combined digital marketing approach often yields the best long-term results.

Conclusion

So, we've walked through the fundamentals. You now know that Google Ads, formerly Google Adwords, is a paid auction system where ad rank is determined by both bid and quality. You understand that your Quality Score is just as important as your bid, and different campaign types exist for different business goals, from a search ad to a video ad.

This platform is not just for B2C eCommerce. It's an incredibly valuable tool for specialized B2B companies, especially when you focus on high-intent keywords that your ideal clients are searching for. What are Google ads and how do they work? They allow you to jump the line and get in front of buyers at the exact moment of their need.

Hopefully, this clears things up about what Google Ads is and how Google Ads works. It's a complex system, but with the right strategy—focusing on campaign structure, keyword selection, and continuous optimization—it can be a predictable and profitable source of new business. A smart, targeted approach is the best way to get a great start with your Google advertising efforts.

Now that you have an in-depth understanding of just what Google Ads are, perhaps you would like to get your personalized Google Ads ROI Scorecard.  Take this short 2 minute quiz and learn what your potential ROI is from Google Ads.  Discover how to maximize your Google Ad Spend for maximum profitability!