Google Ads

Google Ads is an online advertising platform developed and operated by the technology company Google LLC. Originally known as Google AdWords, this unique service allows advertisers to bid to display ads, list products, offer services, or create videos for web users. While many of these ads are tailored to appear at the top or bottom of Google’s search engine results page (SERP), Google Ads can also appear on other websites, within mobile apps, or in videos. Google Ads’ services are sold on a pay-per-click (PPC) basis, which means that advertisers pay Google each time a user clicks on their ad. Since its launch in 2000, Google Ads has become one of the world’s largest and most influential online advertising platforms. Google Ads has also become Google’s most successful product and parent company Alphabet, Inc.’s primary source of revenue. Google Ads generated more than $182.53 billion in 2020 and continued increasing, reaching $237.8 billion in 2023.

Background

The history of Google Ads stretches back to 1999, when Google first started testing a new online advertising platform that it had developed. When testing yielded positive results, the company officially launched its advertising platform as Google AdWords in October 2000. Initially, users could purchase ads through AdWords on a pay-per-impression basis, meaning that advertisers paid based on the number of times web users saw their ads. The platform also incorporated a bidding format that allowed users to compete for the best ad placement. This approach quickly proved popular with online advertisers. As a result, AdWords was an immediate success, earning the company more than $70 million in its first year.

In 2002, Google altered AdWords in two ways: first, the company switched from pay-per-impression sales to PPC sales. This change meant that users would pay each time their ad was clicked, not just when it was viewed a certain number of times; second, Google also changed how ad placement was determined. In addition to the existing bidding system, the company also started awarding preferred ad placement based on relevance. In essence, ad placement would be determined by an overall score that factored in both the price that an advertiser agreed to pay and the relevance of the ad itself to the users who would see it. This system, the first of its kind, helped the most successful advertisers to become trusted among Googler users. That same year, Google also expanded AdWords’ reach by making an agreement with AOL that allowed advertisers to have their ads appear on Google partner search engines for the first time.

Google added site-targeted ads to AdWords in 2005. This new capability allowed advertisers to choose the specific websites their ads were displayed on. Three years later, Google reached a deal with digital marketing firm DoubleClick, enabling advertisers to present the most advanced and relevant ads possible.

More AdWords innovations came in the following years. Interest-based advertising was introduced in 2009. Dynamic Search Ads, which combined Google’s web-crawling technology and knowledge of an advertiser’s inventory to automatically create ads and destination URLs based on the search query and website content, followed in 2011. In 2016, AdWords moved ads from their original position in the right sidebar to the top and bottom of the SERP. Two years later, AdWords officially changed its name to Google Ads. Ultimately, these and other changes allowed Google Ads to become one of the world’s leading online advertisement platforms.

Overview

Regularly used by millions of businesses worldwide, Google Ads is Google’s paid online advertising platform. In short, the platform works by providing Google users with targeted advertisements at the top and bottom of the SERP for goods or services when they enter a keyword associated with specific ads during a web search. Almost identical to organic search results in appearance, these ads help guide Google users to and generate business for the advertisers who pay for them through Google Ads.

The pricing of ads purchased through Google Ads varies. The platform uses a PPC model that allows advertisers to choose a particular keyword that will trigger their ad to be displayed when it is searched for on Google. However, because only so much space is on a SERP for ads, Google Ads holds auctions at which prospective ad buyers can bid on the available ad space reserved for each keyword, which creates competition for ad space among advertisers and boosts Google’s potential profits. Three factors determine whether an advertiser’s bid will be successful: budget, quality score, and relevance.

Budget is determined by how much an advertiser is willing to spend. The bid that an advertiser makes for a Google ad is considered a maximum bid, meaning that it represents the most that the advertiser is willing to pay. A bid can be made on a cost-per-click (CPC), cost-per-mile (CPM), or cost-per-engagement (CPE) basis. A CPC bid states how much the advertiser will pay each time a user clicks its ad. A CPM bid states how much the advertiser will pay each time their ad accumulates one thousand ad impressions. A CPE bid states how much the advertiser will pay each time a user performs a specific action—such as watching a video—on their ad. Google Ads also allows advertisers to set a maximum daily budget for their ad, ensuring that they will never pay more than a set amount per day for their ad. The next factor in the bidding and pricing process is an advertiser’s quality score, which is a measurement of the advertiser’s ad and the landing page based on the user’s experience. A higher quality score translates into lower prices and better ad placement. The final factor is the relevance of the advertiser’s landing page and keywords, which also play an important role in determining the quality score. When taken together, an advertiser’s bid amount, quality score, and the relevance of their landing page and keywords ultimately yield their Ad Rank, which is the position their ad will have in the SERP, on other web pages in the Ads network, or YouTube.

Google has five main types of ads: search campaigns, display campaigns, shopping campaigns, video campaigns, and app campaigns. The most basic type of Google ad, search campaigns, are text ads that appear on the SERP. Most search campaign ads are PPC, so advertisers pay each time a user clicks on their ad. Because these ads are text-based, the copy must be well-written and high-quality. Shopping campaigns allow advertisers to promote and sell items visually. Google ads in this category typically feature details like the name and price of the product being sold, as well as a picture. Advertisers who purchase shopping campaign Google ads can also select negative keywords—that is, keywords they do not want associated with their ads. Advertisers who opt for shopping campaigns must also utilize Google Merchant Center so products from their website can be pulled into the Google platform. Display campaigns allow advertisers to create Google Display Network (GDN) ads. These ads can appear on third-party websites outside Google’s SERPs. Most include both text and images. GDN ads can be advantageous for advertisers because they can reach an estimated 90 percent of Internet users. GDN ads may appear when users check their email, use apps, or simply browse the web. Video campaigns offer advertisers the opportunity to create ads that appear in YouTube videos. These ads may appear before, after, or mid-way through a YouTube video. While some of these ads are skippable, others are not. Most range from six to fifteen seconds in length. Discovery ads also appear on the YouTube search results page when certain keywords are entered. Advertisers can choose from various banner and overlay ads as well. In addition, Google’s video campaign platform allows advertisers to adjust the specific target audience for their ads. App campaigns are ideal for advertisers seeking to drive app installations or in-app purchases. These ads can appear on SERPS, the GDN, and/or YouTube, with exact placement automatically determined by Google’s machine learning system for maximum profitability. Google’s algorithm will also take an advertiser’s text and other assets and create the actual ads on its own.

There are several advantages to advertising through Google Ads. These include a faster return on investment, easy budgetary control, broad marketing support, simple reporting, and comprehensive targeting control. Google Ads also offers an array of useful ad auditing, keyword research, ad building, and ad monitoring tools.

Google Ads continued evolving using the latest technology in the mid-2020s. The company introduced advanced artificial intelligence (AI) features to improve performance and user engagement. New controls and reporting improvements were added to Performance Max campaigns, providing better insights and management tools. The company also implemented changes to data privacy measures to meet changing regulations, including updates to advanced consent modes.

Bibliography

Ali, Asif. “What Is Google Ads & How Does It Work? A Comprehensive Guide.” Semrush, 11 Oct. 2023, www.semrush.com/blog/google-advertising. Accessed 20 Jan. 2025.

Bagshaw, Thomas. “The Evolution of Google AdWords—a $38 Billion Advertising Platform.” WordStream, 18 Dec. 2023, www.wordstream.com/blog/ws/2012/06/05/evolution-of-adwords. Accessed 20 Jan. 2025.

“Google Ads: What Are Google Ads & How Do They Work?” WordStream, www.wordstream.com/google-ads. Accessed 20 Jan. 2025.

Landrum, Kellis. “How Do Google Ads Work?” True North Social, truenorthsocial.com/digital-marketing/how-do-google-ads-work. Accessed 20 Jan. 2025.

Martin, Michelle. “A Beginner-Friendly Guide to Google Ads for 2024.” Hootsuite, 17 Oct. 2023, blog.hootsuite.com/google-ads. Accessed 20 Jan. 2025.

Perricone, Christina. “The Ultimate Guide to Google Ads.” Hubspot, 14 Mar. 2024, blog.hubspot.com/marketing/google-adwords-ppc. Accessed 20 Jan. 2025.

Weaver, Brandon. “The History of Google Ads 20 Years in the Making.” Instapage, 12 Feb. 2020, instapage.com/blog/google-adwords-infographic. Accessed 20 Jan. 2025.

Weisinger, Marc. “The Google Ads Playbook: 18 Types of Google Ads and When to Use Them.” Shopify, 10 Nov. 2022, www.shopify.com/blog/google-ads-types. Accessed 20 Jan. 2025.