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How does Google Adwords work?

Updated on April 1, 2010

What is google Adwords?

When you do a search on google, have you noticed that there are two types of results displayed on any page?  The natural search results cover the majority of the page.  But sometimes there are a couple or more listings at the topmost of the page that is usually shaded in blue.  And of course there is always a list that is on the rightmost side of the page separated by a line.  These are called "Sponsored Listings" which means advertisers pay for those listings every time they get clicked on google search results.  And they pay using Google Adwords.  You can set up your google adwords account in a few minutes.  All you need is a credit or debit card in hand and a few minutes to spare.

1. Create a Google Adwords account

Creating a google adwords account is simple.  Visit and click on the "Start Now" button.  Follow the simple instructions to create a new account.  You will have to create a new gmail account during this process.  Or if you already have a gmail account and would like to use the same email address, just sign in using your login information and you have a google adwords account!  

2. Fill up Account Information:

Once you have created a google adwords account, you will need to fill up the billing information to be able to start advertising.  There are two types of programs that google adwords offers.  One is the prepay method and the other is the post pay method.  In prepay program, you pay a certain amount before hand and then start advertising until the amount is exhausted.  You then pay again for the ad. to continue.  In postpay method, you will charged $1.00 or so initially to verify your credit card details and then be charged automatically to the credit card or bank account on file once the bill reaches a threshold value set by google.  

Usually the first threshold limit is $50.

Once the payment clears, the threshold limit is increased to $100.  

The third time, the threshold limit further increases to $200

The fourth threshold value is $350

The fifth threshold value is $500.  

This is the maximum threshold value that I have reached so far for my monthly budget in advertising my website

I am not sure if there is a higher threshold value or not, but I get charged anytime the value reaches over $500 and under $550. 

3.Setting up your Ad. Campaign

Once you provide your credit card details, you will be taken to the campaign management home page.   Google adwords provides three categories to help you organize your different ads.

1.  Ad. Campaign -  This is a very broad category to generalize the products you have in hand.  For example, if you have clothing, jewelry, electronics, CDs and more to sell -  Clothing could be your first campaign, jewelry could be your other campaign and so on.  You also set up your daily budget and cost per click bid here.  This means that google will not show your ads. when the cost per click bid is higher than what you chose and will stop advertising for the day once the daily budget is reached!

2. Ad. Groups  -  Ad. groups help you further group your ads. within the category.  For example, Clothing could include Mens Clothing, Womens Clothing, Lingerie, Kids Clothing and more...

3.  Then comes the actual Ad.  -  Carefully choose the words to describe your product or service within the character limit allowed for each line.  Always use the specific product page you are advertising about for the destination URL.  "DO NOT USE THE HOMEPAGE FOR THE DESTINATION URL" unless it is required for the ad.

4.   Add Keywords   -   Every keyword you choose would cost you money.  So choose keywords that precisely describe the product or service you are promoting.  If you are selling "Roses", do not use the keyword "Flowers" in the list.  Because every time anyone searches for flowers and not necessarily "Roses" your ad. might pop up.  And if they click on your ad. looking for flowers which could be anything, you get charged!  Of Rose is a flower too, but what is the probability that every person looking for a flower would look for a Rose.  Think!

5.   Save Changes   -   Set up the time that you want to start advertising, which could be a specific time in future or start immediately.  Save your changes.

4.   Review Period:

All Campaigns go through a review period to check if the content is appropriate and within google's policies.  It doesn't take more than a few hours for the review and then your ad goes active.  Shortly from there, you can see your ads. showing up on google search engine results when you type in the keywords that you entered in your campaign!

But it doesn't stop here.  Keep monitoring the performance of your ads and keywords frequently.  Make changes accordingly.  And once your website starts getting traffic, convert the traffic into revenue by using google adsense.  Would be time to get back some of the money spent on google.

Check out my next blog on "How google adsense works" to learn about earning revenue from google.

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