How Google AdWords delivers Google money
A few friends outside of digital marketing circles, along with a few clients,have asked me the question of how Google actually makes its money.
From an outsider’s perspective, it seems that Google is giving us everything pro-bono; that they are simply providing a service out of the good of their hearts. If you think that, it must be confusing as to why companies charge for AdWords management packages.
Look at any business technology website and you’ll soon see that Google is far from a charity.
The key to Google’s finances can be found in their search results. The three ‘Sponsored Results’ in the yellow box at the top of every search are Google’s paid ads – what they call Google AdWords. Look down the right hand side of the results and you’ll see more Google revenue generators.
AdWords is Google’s PPC program and it delivers around 70% of Google’s revenue. The other 30% comes from Google AdSense, a plug-in that shows Google sponsored ads on other websites. It’s from these two income sources that Google earns it’s millions.
Do people pay simply for their ads to show on Google?
No. Google AdWords delivers Google money only when someone clicks on an ad. That’s where the Pay-Per-Click (PPC) phrase comes from. You could imagine how blank AdWords would be if you had to pay just to advertise in the search results.
Google is essentially ‘free’ with the option to pay-you-way to the top.
How do you know how much you are paying per click?
Each keyword has a different value associated with it. The less competition, the less the keyword will cost. Simple.
AdWords takes an auction format. You can bid higher than the value associated with a keyword to try and get your ad in the #1, #2 or #3 positions. Other advertisers can also bump up their bids to try and trump you. The amount you pay is referred to as the cost-per-click (CPC).
In reality, an advertiser could pay $100 per click and be #1 for almost any keyword, but would this be cost-effective for the product they are selling?
So, what keywords cost the most? Here are the keywords with the top-5 CPC:
Amazingly, the top CPC for the keyword “Insurance” is $54.91 in Google AdWords. The keyword “Loans” generates a top CPC of $44.28. You can see the top-20 list in more detail here. If you are in the financial or law sectors, you’re in for an expensive time on Google AdWords.
Is Google transparent on how they set Google AdWords prices?
Google are as transparent as they can be without jeopardising their product. Their Facts about Google and Competition section provides information and videos on a variety of topics, including quality scores, their AdWords auction and how search ads work.
Want to get involved in Google AdWords?
AdWords is an attractive way to get your business on Google’s first page quickly. Our AdWords management packages are available to provide customers with the means to do just that. This article has detailed Google AdWords in a simple way. In reality, there is a lot more to it than just bidding high (see our article on the benefits of hiring a Google AdWords company).
If you would like to chat about Google AdWords management packages, or would like to learn more about SEM, contact Jayson Rodda on 1300 76 00 84.