Because at the end of the day, it’s the user experience that makes or breaks Google and its reputation. Google knows this.

But with that being said, Google makes most of its money from advertisers.

That’s because so many people use Google, so the advertisers flock to it. Rightfully so.

Therefore, Google must strike a balance of making money selling ad space without harming the experience of its users.

And that’s where you, the intrepid business owner, come in.

You want to design your ad to provide the best possible experience for Google users – for Google’s benefit and for your own.

We’ll explain how that works in the rest of the article.

By the time you’re done reading this article, you’ll have a thorough answer to the question “how do Google ads work.”

AND you’ll walk away armed with some money-making tips!

Let’s get started.

How Does Google Ads Work?

Cue the voice of Morpheus from the Matrix…

“What if I told you that billions of auctions were happening everyday?

But not the kind of auctions where people stand up and shout out their offers to a man on a stage.

No, these auctions are invisible and happen automatically, behind the scenes.

And yet, huge sums of money in the millions are constantly flowing in thousands of different directions.”

Yep. These are Google Auctions.

Google Ads works off online advertising space that is being auctioned and sold by Google.

Welcome to the 21st century!

Now getting back to Google Ads…

Google Ads, formerly known as Google AdWords, are online advertisements that are based partly on keywords.

Keywords are searchable words or search terms that relate to a business’s products or services.

Hence the name Google AdWords = Ad Words.

Words/keywords are a big part of the equation, both in terms of how the ads are presented and how much the ads cost advertisers.

So let’s get into some specifics. What does this all mean?

What are Google Ads?  

how does Google Ads work

Google Ads is Google’s platform for businesses/advertisers. Here advertisers can place bids on ad space for their ads.

Google Ads can appear in the following places:

What Is Google AdSense?

Google AdSense is Google’s platform for website owners/publishers. This is where individual websites can sign up and agree to host Google Ads.

In return, the publisher gets paid every time an ad on their website is viewed or clicked (depending on what kind of ad it is).

In addition, Google will automatically pick the most relevant and highest paying ads for publishers.

Receiving payment from Google AdSense is very easy and hands-off.

Google first receives payment from the advertiser and then pays the website publisher a cut.

For the publisher to enable AdSense on their website, they simply sign up for an AdSense account and follow the prompts from Google.

This is separate from a Google Ads account, which is for advertisers.

When everything is set up, the website owner will insert a bit of html code onto their website, wherever they want ads to show.

Then voila! They will get ads from businesses that are relevant to their site’s content and to its readers.

So to recap, you now know the differences between the Search Network and Display Network on Google Ads and Google AdSense.

Now let’s get into the nitty gritty of the question “How do Google ads work?”.

The Google Auction Process

Let’s go back to the Google Auction process for a second. Morpheus mentioned how billions of auctions are happening every day.

Understanding these auctions and how the winners are chosen is the key to making money with Google Ads.

There are two types of auctions:

1. Display Network And AdSense Auctions

These auctions happen whenever someone loads a website that has available Google ad space for an advertiser to fill.

“Winners” of these auctions are advertisers whose ads get displayed at a low cost on relevant and prominent websites.

Relevancy is based on the keyword(s) that the advertiser targets.

So if an advertiser wants to target the keyword “pro golf clubs,” then their ad will get matched to a relevant web page.  

For example, an AdSense enabled blog post that talks about “how to choose the right pro golf clubs” would likely be a…

…good match for the advertiser targeting the keyword “pro golf clubs.”   

Therefore, building a solid keyword strategy and choosing the right keywords to target are essential for making a profit with…

…Google Ads, and of course, for reaching your target audience.

2. Search Network Auctions

These auctions work differently, but the essence remains the same.

On the Search Network, an auction happens whenever someone searches a keyword in Google, which happens billions of times every single day.

Every second 2.3 million searches are done on Google. And the majority of those SERPs include Google Ads.

That’s over a million auctions happening per second.

So, the “auction” is the keyword search, and the ad space for that keyword search is what’s being sold.

how do google ads work

As you can see, when using paid search advertising, ad space can appear at the top

how do Google ads work

and at the bottom of SERPs.

And who are the “winners” of an auction? Simply put, it’s the advertisers who win ad space for that keyword search.

This means that you’ll be competing with other similar businesses for that sweet, sweet ad space.

You’ll also be competing with similar businesses to pay the least amount of money as possible for advertising.

There are three different payment schemes available for Google Advertisers:

So how can you pay the lowest costs possible and ensure that your ad displays more prominently on SERPs and other websites?

Glad you asked! That’s the million dollar question, and what mastering Google Ads is all about.

If you need individualized help with Google advertising, then feel free to talk to our team.

Or you can also check out our professional PPC management services. We’d love to see you succeed! 

3 Money Making Tips For Google Ads

1. Choose The Right Keywords

You want to target keywords that aren’t too competitive (i.e. expensive) for your business.

This is especially vital for businesses who have limited daily budgets for their advertising efforts.

keyword planner

You’ll have to place a maximum bid/maximum amount of money you’re willing to pay for a click on your ad (if you use the PPC model).

Therefore, your goal is to try and make every click count.

Not every click will result in a sale of course. But you should still have the mindset of making every click count.

And this is why you must consider searcher intent.

If you want to know how Google Ads work to make you money, it’s by targeting your ads at people who are ready to buy your product right now!

Besides, you have to bring in new sales to cover the cost of your ad campaign.

Otherwise you’ll quickly find yourself deep in the hole on advertising costs.

And this leads to the next part – choosing relevant keywords. It all starts with an extensive keyword research.

There are a lot of tools to help you with this, Google Keyword Planner for example.

The keywords should be relevant to driving conversions if conversions are your goal!

For example, if you want more local sales for your new exercise product.

Then a highly relevant keyword for making more sales would be “exercise equipment in Atlanta.”

Someone who searches for that is very likely ready to make a purchase!

And since it’s a localized search, it will be less expensive and more effective to target than…

…targeting the keyword “exercise equipment”, which will also be most likely targeted by ecommerce businesses.

There are four keyword match types in Google Ads and these are broad match, broad match modifier, phrase match, and exact match.

2. Invest In Good Copy

Now in order for your ad to work effectively, the ad copy cannot be weak!

If you don’t have experience writing persuasive and compelling content, then you should consider hiring a professional writer to…

…write your ad copy and landing pages for you.

Having quality ad copy can actually save you money in the long run in a number of ways:

3. Optimize Your Quality Score

Speaking of the quality score, let’s talk about it.

QS is the most important metric for a successful campaign because it affects some of the most important metrics of a campaign. These include:

Quality score is the rank given to an ad or keyword based on how it is performing. It can be ranked from 1-10 with 10 being the highest. 

how does google ads work

We’ve finally come to the climax of this journey. To “win” the auction, you have to optimize your quality score and bid amount.

The better both of these are, the better your ad positioning will be.

For example:

So how do Google Ads work in conjunction with the QS? See below:

how does google ads work with quality score

The first advertisement achieved the highest ranking in the auction for this keyword search.

When you raise your QS, your ad will get displayed in better positions on the SERP (top vs bottom)…

…so that you can get more clicks and conversions, without raising your bid!

Google will also reward advertisers with high quality scores by lowering their CPC.

If you’re curious what the average CPC is: across all industries, the average CPC is $2.32 on the search network and $0.58 on the display network.

But remember that your CPC will be based on your QS, max bid, and the competitiveness of your keyword.

Very competitive keywords will always be expensive no matter what.

But here’s a reassuring thought: competitive and expensive don’t always mean “better.”

So what are the factors going into the QS?

Google won’t reveal all of them, but these factors are pretty much confirmed:

Consider The Display Network

To wind up our article, let’s talk more about the Display Network.

We’ve gone over all the basics of the Search Network, but the Display Network also has its advantages.

display network ads

Search is mainly for targeting people who are already searching for specific items.

On the other hand, display ads are useful for getting people’s attention by targeting likely buyers before they’re ready to buy.

5 Display Network Facts

  1. An extensive network of over 2 million third-party websites (that reach over 90% of people on the internet) that have partnered with…

    …Google and agreed to host Google ads.

    These ads can be anything from pictures, videos, text, to rich media format.

  2. They offer multipurpose targeting options, including remarketing.

  3. This network is for advertisers who want to show their ads wherever they want.

    You can choose the type of page, specific websites, and even specific audiences.

  4. Manual ad placements let you choose specific pages, online videos, games, RSS feeds, mobile sites and mobile apps.

    You can even exclude certain websites from showing your ads.

  5. You can measure your results to see what pages the ads ran on, which ads got the most clicks, and which sites gave you the best…

    …sales for the lowest cost.

5 Money Making Tips For The Display Network

  1. Common uses for display networks are: to sell more products or services, engage with customers, and increase brand awareness.

  2. The main advantage over search network ads is that they can attract attention better via colors and motion through…

    …image, video or rich media format. Storytelling is a powerful technique in marketing. And display ads make it possible to leave a lasting impression.

  3. You can do a remarketing campaign by showing your ad to people on the display network who’ve already visited your site.

  4. Advertising scale is up to you. To reach a huge audience you can target affinity audiences.

    For specific audiences who are ready to purchase you can use in-market audiences.

  5. Your results are automatically used to adjust your targeting strategy.

    For example, if a website in the display network isn’t helping you reach your set goals.

    The Google Ads system can (optionally) automatically adjust your bidding strategy.


Many businesses struggle with the commitment necessary to make money with Google Ads.

This is usually because they struggle with answering the question how do Google Ads work?

But when you understand how Google works and the beauty of its advertising options.

Then, you can easily find the motivation to stick with it until you’re making a profit.

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