Basic Concepts about Google Adwords

Feb 13, 2017 - Marcel Odena

Learn the basic concepts of Google Adwords that you will need to intelligently structure campaigns as well as to interpret campaign data to improve them. Many of these concepts will be asked in the Google Adwords basics exam, also called “Fundamentals”. This article aims to explain the concepts in a didactic way so that later you can reflect on them and you will see how you, by yourself, will be able to know how to answer the correct questions of the basic concepts exam of Google Adwords.

Main concepts of Google Adwords

1) CTR – Click Through Rate (%)

El CTR, Click Through Rate, is a metric that measures the ratio of clicks your ads have received in relation to the number of times they have been shown. The CTR is calculated by dividing the number of unique clicks by the number of ad impressions and applying the percentage per cent to have the metric as a percentage.

What is it for? The CTR serves to know how attractive the ads are for the people you’re showing these ads to. If out of every 100 people who see your ad 75 people click on the ad it means that your ad has a lot of claim (this would be a CTR of 75%). On the other hand, if out of every 100 people only one person has clicked on your ad (1% CTR) it means that your ad does not attract many people; This can be for several reasons: because the ad text is not attractive, because the message is not relevant to the user’s search, because the position of the ad is bad and the user barely sees the ad, etc.

This metric can be calculated on several elements of your Adwords account: the most normal thing is to calculate the CTR on the ads, but also the CTR is calculated on each of the keywords in your account (how many times has a keyword shown your ad versus how many clicks it has received). It is also calculated at the ad group, campaign level (adding all impressions and all clicks), etc.

2) Conversions Rate (%)

The conversion rate is a metric that measures the conversion rate in relation to the clicks received. A conversion, in Google Adwords argot, is an action of value for us that the user has made on our website. For example, every time a person completes the contact form on our landing page, we post it as a conversion. Well, the conversion rate measures the number of conversions, in this case the number of forms received, with respect to the number of clicks we have received. Difference between CTR (rate of clicks) and conversion rate?

The CTR metric tells us how attractive the ads are to the user.
The conversion rate metric tells us to what extent we convince users to make actions that for us have value once they land on our landing page.

These two metrics are key and should be maximized, in other words, increase the value of the CTR of our account and increase the conversion rate. is important to analyze and take into account the two metrics together. You can fall into the danger of becoming obsessed with improving only the clicks rate (CTR) but forget the conversion rate, so that in this scenario you would get many more clicks but they do not convert (they don’t do any of the actions on the landing page that for us have value).

An example : let’s assume that we have received 100 clicks and that we have only gotten 2 contact forms. In this case the percentage (or rate) of conversion would be 2% (2 conversions divided by 100 clicks and in percentage). If instead we say that we have a conversion rate of 30% means that out of every 100 clicks (100 people who have clicked on the ad) we get 30 forms, in other words, we convince 30 people with our landing page to fill in the form and give us their contact information.

I leave here an article of 10 experts in Advertising Pay Per Click (PPC) in which each of them gives advice when it comes to testing the ads. I especially like the advice number 8 of Amy Bishop that says it is important to analyze the improvement in the ratio of clicks (CTR) as the number of conversions achieved. Amy says her favorite tip is to look at the relationship between conversions and ads impressions . With this metric, she is indirectly reviewing the two metrics (CTR and Percentage of conversions). Here is the article if you want to deepen: PPC Ad Testing Tips From Our Top 10 Experts.

3) Ranking of an ad on Google

The ranking of an ad is a value that indicates the score an ad has . The higher this value is, the better the ad is displayed within the Google search results page (what is called in the SERP’s argot). In each search that the user makes in Google, the ranking is calculated for each advertisers’ ad that are bidding to appear in the search that the user has made; the ad with the highest score is the one shown above all of the search engine and then the next one with the highest score and so on.

he ranking is obtained by multiplying two factors:

Maximum CPC: the maximum cost per click that we are willing to pay for a click, that is, the Maximum CPC.
And the Quality Score, metric that comes to indicate how good the ad is.
And it also influences “the impact of ad extensions “: the text of an ad may be followed by extensions that enrich it. Depending on the extensions we have configured, and how well we do it, the ranking will improve or worsen.

4) Quality Score

The quality score is a metric that would come to indicate how good would the user experience be if Google showed our ad to the user for the search he or she has made. This metric ranges from 0 to 10 (visible quality score), with 10 being the best possible quality score and 0 a disastrous quality score.

What factors mainly influence the quality score? If you stop to think about it, it’s quite common sense:

Ad relevance : Google wants that when someone does a Google search it will be shown what they’re looking for; given that the ads have a commercial purpose, what Google has designed is a way to position the ads where advertisers will be rewarded when, within the limitations that there are as dealers, they offer the user something that is related to the search he does. A first point is that the text that appears in the ad is relevant to the user, and this has a lot to do with the keywords that we configure, the type of agreement with which the ad is activated.
Click Through Rate (CTR): On the one hand, the higher the CTR, the higher the quality score. Why? If out of every 100 impressions they click on our ad 80 times, this would mean that our ad is super-attractive, which is something that users are interested in, then Google rewards it by giving it a high quality score. And, on the other hand, a very poor CTR will imply that Google will penalize us by putting us at a very low quality score.
Landing page : the ad is relevant, people click on our ad, and what is left to close the circle of virtuosity is that the landing page to which the user lands after clicking the ad has something to do with the search he has made and with what is said in the ad, in other words, that the search-ad-page is connected. And also that the “experience” of the user in the landing is good, meaning, that we do not overwhelm him with twenty-thousand pop-ups and annoying things.

5) Ad extensions

Ad extensions are a series of extra information that complements the text that we have written in the ad. What we write as ad text is always shown (if the ad wins the bidding, of course), but the extensions are not always shown . In each search that the user does, in each bidding between advertisers Google decides what extensions will show for each advertiser . It is advisable to configure all ad extensions that make sense, and do it well, and the rest is already Google’s business. To give you an idea of how Google decides whether to show them or not: if you are showing the extensions and Google sees that they help to increase the clicks rate that the ad receives, either in the ad or clickable extensions, it will continue showing them, but on the contrary, if it shows the extensions and they don’t have an impact on the clicks rate, they will be shown less.

There are quite a few types of ad extensions, I’ll explain the most basic extensions:

Location extension: it allows you to show the advertiser’s location (physical address) as a complement to the ad. This is set by linking the Google My Business account (Google Places) of the advertiser with the Google Adwords account.
Call extension : it allows you to display the advertiser’s phone next to the ad. In line with what I told you before, if Google is showing the phone next to your ad and people call, it will be shown. But in the other way, if it shows it and no one clicks or the CTR does not improve either, it will stop showing. That the phone is shown as an extension can be a problem, because it is not the advertiser who controls when it is shown, but Google . But you should know that the phone can not be placed as ad text. It goes against the editorial policies of Google; if you do, it may “pass” for a while, but in the end they will reject your ad; I recommend you configure the call extension well.
Link extensions: they are some links with a text that links to specific pages of our website (or other landing pages different from the page we have set up in the ad.). What is the point of this type of extensions? Imagine a search for a somewhat generic product or service (eg “aluminum doors”), in this case, the ad would lead to the page where the advertiser’s offer is displayed and on this page it could show the different types of doors available. But what allows us to do the link extensions is to put a link to the specific page of each type of door, so in this example we could put a link to the “blind” aluminum doors, another link to the “die cut” and another to the “microperforated”. If the user does the generic search but has microperforated doors in mind, you can click on this link and go directly to the specific page of microperforated aluminum doors.
Callout extensions: it allows to write texts of 25 characters that complement the ad. We can write 3 or 4 texts (or more or less) and Google will decide which ones to show and how often. What’s the point of these extensions? It makes sense that the ad is different depending on the user’s search. For the same service that is announced, the way to bid may depend on how the user requests it, types it in Google. But there are things about the service that will be constant, imagine a service that is offered 24 hours a day (urgency type), or a 6-month guarantee, etc. These aspects will be constant in all the ads and complement it. Well, we could add this type of information through the callout extensions.

You can find more information about ad extensions in this article: What are ad extensions in Google Adwords?.

6) Cost per conversion

The cost per conversion is a metric that measures how much money we have had to invest to get a conversion, therefore, to get a user to finish doing an action on our website (or landing) that we have configured as “conversion”. For example, imagine that we configure a conversion when someone “requests a demo”, that is, we create the conversion in Google Adwords, it generates a conversion code and we paste that conversion code in the confirmation page of a demo request. Well, imagine that we activate the campaign, the days go by, we have invested 150 euros and there has not yet been any conversion, no user that has requested a demo. But after a few days a user who has clicked on one of our ads finally requests a demo, meaning, “the user converts” (this is the jargon that is used). Well, imagine that it is the first (and only) conversion we have achieved and we have invested 200 euros. What would be the cost per conversion in this case? Well, 200 euros. In other words, in this example, get a user to request a demo has had a cost of 200 euros in advertising in Google Adwords. . Keep in mind that this metric, the cost per conversion, the Google Adwords interface can show you from multiple views, it can be displayed at campaign level, at ad level, at keyword level, at account level, etc.. What the tool does is, depending on what you select (all campaigns, or only one, etc.), add all the data (it makes the sum of the cost, the sum of the conversions and performs a division of the cost between the number of conversions).

This concept, from my point of view, is very important and is one of the key parameters that you have to look at when optimizing Google Adwords campaigns . The objective of optimizing is usually that with the same investment (budget) you get more conversions and this happens by lowering the cost per conversion.

7) Segments in Google Adwords

The segments in Google Adwords allow us to see performance statistics broken down into several variables, such as the type of device (desktop, mobile, tablet). We can apply segments to the performance statistics of a campaign: when we are visualizing in the interface of Google Adwords the performance data of a campaign we have the possibility of seeing that detailed data according to different dimensions that may be of our interest. For example, in the click column, imagine that we have 100 clicks and in the conversion column we have 10 conversions (conversion rate of 10%). Well, we can see these values depending on the type of device that the user used when clicking on the ad. This way he will tell us of those 100 clicks how many were through desktop, how many via mobile and how many via tablet. The same for conversions, conversion rates and as many metrics as we are seeing in the Adwords interface. This function is very useful because it allows us to quickly see, for a campaign, or for all, the data broken down by device.

Another segment that we can apply is the “name of the conversion”. Imagine that we have defined several types of conversions; For example, we have defined a conversion to count users who “request a demo” and we have configured another conversion for users who “have downloaded an ebook from our website”. Well, if we look in the column of conversions and select the segment “name of the conversion” it will break down the number of conversions of each type.

8) Dimensions in Google Adwords

The concept of “dimensions” in Google Adwords is similar to the concept in the previous section, there is a utility in the Google Adwords interface called “Dimensions” that allows you to obtain a level of detail related to performance statistics that is superior to what we see in the general view of campaigns/groups .

Within the “Dimensions” tab we can select different dimensions: the hour of the day, the day of the week, the name of the conversion, the type of device, etc. And what the tool does is show the metrics based on those dimensions. Imagine that we have as columns the metrics: cost, conversions, clicks, impressions and CTR. Well, if we select “hour of the day” it will give us the aggregated data of each metric for each hour (within the time range we have selected, above everything on the right); if for example we have “the previous month” it will paint the clicks that we receive between 10am and 11am during that month, the clicks we receive between 11am and 12pm, between 1pm and 2pm, etc. The same will do for the metric conversions and the rest that we have configured as a column. This functionality for me is super-useful because it gives you a very valuable level of detail to then optimize the campaigns. For example, if we see that when there are more conversions (with a lower cost per conversion) is in a certain time slot we could increase the bids in that slot, to get more. And penalize other slots with little or no conversions and at a very high cost per conversion.

9) Structure of campaigns in Google Adwords

In a Google Adwords account, several campaigns are usually created. A campaign can have multiple ad groups. Each group of ads has its keywords and its ads, if we talk about search campaigns (if they are of “display” it can have keywords and/or other segmentations). And what criteria to follow when creating all this? The general approach is is to move the structure of the information from the advertiser’s website to the Adwords account ; for example, if the advertiser’s website has 4 categories of products (shirts, pants, sweatshirts and shoes) then we could create a campaign for each ad category. And then we could create an ad group for each sub-type of product, for example, a group for “long sleeve shirts”, another for “short sleeve shirts”, etc. The good thing about doing so is that in each group we will put very specific keywords (eg “short sleeve shirts”) and the ad we write will be very relevant (it will talk about short sleeve shirts and the landing page should be a page showing short-sleeved shirts). So the probability that we show the user what they are looking for will be very high , and therefore, it is assumed that the conversion on our website will be better (than if we structure the account at random).

Is this the only way to structure campaigns? No, at all, it can be structured in different ways and have good results, but always with this principle of showing an ad (landing page) that is relevant to the user’s search. In the fundamental’s exam of Google Adwords they usually ask questions related to this. If you move to a more advanced level, you will see that more complex structures can be created (for example, create specific campaigns for keywords with very good conversion, in which all the keywords are configured with exact match, and these are configured as negative keywords to the rest of campaigns, with the aim of giving a lot of budget to this campaign and also having high levels of quality).

If you want more information on this topic I recommend you read this article: How to structure ad campaigns in Adwords.

Types of campaigns in Google Adwords

There are several types of campaigns in Google Adwords, each of them has some advantages and disadvantages, I explain the most basic concepts:

10) Campaign only in the search network

They allow to show ads in Google when someone does a search related to some of the keywords that you have configured in your campaigns . We have to create a structure as I explained earlier; If you do it right some keywords will activate your ad for the searches of the user that you are interested in announcing. This type of campaign also allows you to show ads on the Google Partners search network; that is, on web pages that have an internal search engine which works on Google’s search technology.

Search campaigns capture “DEMAND” traffic, in other words, the user is demanding your services or products (sometimes typing super-explicit phrases); the power of this type of campaign is that you can appear when the user is looking for you. The user looks for you, you show your ad, he clicks on it, arrives at the destination page and if you convince him he gives you his contact information (you get a lead). Surely this contact is very predisposed to contract your service or buy your product (also called “hot leads”).

Search campaign handicaps:

there are services / products for which there are very few searches and therefore can generate very few leads; in these cases it is usually necessary to resort to display campaigns.
Another, the costs per click can be high and make it economically unfeasible to advertise.

11) Search campaigns with display selection

For search campaigns with display selection applies everything said in the previous point, but what the system does automatically is to show the ads (of text, which are displayed on the Google results page) also in websites that have to do with the keywords that we have configured. Google Adwords applies a “contextual” segmentation, meaning, if a web page (that supports advertising) deals with related topics to our keywords, it will try to place our ad in that advertising space.

I’m not a fan of these campaigns, basically because we can say they are not “neither fish nor fowl”, neither are pure search campaigns nor are genuine display campaigns . For example, the CTR that shows the campaign is the aggregate of the ads that appear on the Google results page and the CTR of the ones that appear on the website, so the CTR you see in the campaign is usually much lower that if it was only search, you have to apply a segment to see the CTR in search and which is the one that applies in display (and it is not very practical). On the other hand, this part of the display that makes the tool alone is very limited, for example, you can not control the locations in which they leave, you can not modify the bids in the locations according to performance, etc. And you can not load banner ads, which would be nice, if you want to avoid all these handicaps better create a display campaign as such.

12) Display only campaigns

These are the “pure” display campaigns, and allow thousands of users to browse the internet to see our ads . Text ads? Yes, you can, but the usual thing is to set up to display graphic ads ( banners ). The operation is as follows: a user is reading an article on a website, which accepts advertising from Google Adwords, and on this website an ad appears; the text ad the good thing is that Google Adwords can place it in practically any advertising space (slot), but the bad thing is that it is text, and it does not capture as much attention (nor is it as nice) as a banner well done. And for the banner just the opposite, it is more beautiful and captures more attention but has a certain measure and is more limited to show only in those spaces it fits (if the banner is 300×250 pixels, it can not be displayed in an advertising slot of size 728×90 pixels).

What are these types of campaigns designed for?

The display campaigns are designed to capture a lot of traffic , sometimes traffic to a large extent, of people who see the banner/ad and click on it and thus reach our web/landing page. And does it convert this traffic? Yes, but generally not as much as the traffic we can pick up with ad clicks in the Google Adwords search engine.

The DNA of this type of advertising: you have to keep in mind that this type of advertising is OFFER (not DEMAND, like search campaignsWhat does this mean? because most people who click on the banner did not have in mind what you offer them, they were reading what was on the internet and suddenly you appear with a banner and an offer. Many of them, most of them, do not have a short-term (or long surely) need to buy the ones you offer, or to hire the service you offer them. But… some are curious about what you offer them and they click on the banner , and many think: it seems interesting, maybe … and that’s where the game starts. Then they land on your website and that’s where you have to convince them. Most of you will not convince them on their first visit. But some yes; to others if you implement good remarketing campaigns you may convince them in a second or third visit. And so, adding lead after lead (or sale after sale) you can also get results with this type of campaign.

Well configured and optimized display campaigns can generate a high flow of leads, and the best, fairly constant over the months.

Another purpose of the display, and here are many exam questions, is to make your brand known , or a new line of products to many people (although they don’t convert, don’t buy, we are interested in publicizing the product).
For this purpose, the display campaigns are ideal, because they capture a lot of traffic (they reach a lot of people) and we can segment in a very precise way to reach the desired audience. We can configure, for example, that banners of a makeup product for women will be displayed on pages that speak of makeup for women, we can create another campaign with a segmentation aimed at women with interests in makeup or fashion, etc. Here is the job of creating display campaigns, investigate the types of segmentations that can work, configure, measure and optimize according to results.

Prepare the Google Adwords fundamentals exam

I hope that these 12 basic concepts about Google Adwords that I explain in this article will help you in your learning of Google Adwords. The basic concepts exam consists of 100 questions, with these 12 concepts you can certainly answer several questions, but there will be other questions that you will have to continue studying to find the solution. Some time ago, when I first examined the fundamentals exam, I wrote an article with material that can be useful when studying and preparing for the exam, here you have: Tips for preparing the Google Adwords fundamentals exam

Marcel Odena

CEO at Magnetica Advertising | LinkedIn Ads Expert

Since 2013 I've been working in the Pay Per Click Advertising Industry. I manage Google and LinkedIn Ads accounts for several B2B companies. I work to deliver results to my clients as well to contribute to do better B2B marketing. I like to learn and share my knowledge at the same time.