How to advertise on Google: the auction, the campaign types and your first campaign

What is advertising on Google and how does it work?

Advertising on Google (Google Ads) means you pay to appear in Google's search results and advertising network. You pay per click, not per impression, and the price is set in an auction where both your bid and the ad's relevance count. That is why a smaller company with relevant ads can beat a larger competitor's higher bid.

The model is called PPC (pay per click) and is the core of SEM, paid visibility in search engines. What sets it apart from organic search work is the time horizon: ads can bring in traffic the day they go live, but the traffic stops the moment you stop paying. SEO takes longer but builds lasting value.

A common source of confusion: Google Ads used to be called Google AdWords and was renamed in 2018. When older guides mention "AdWords", they mean the same platform.

How does the Google Ads auction really work?

Every time someone searches on Google, a split-second auction runs between all the advertisers bidding on that search. Your position is decided by your Ad Rank, which, put simply, combines your maximum bid with the quality of your ad at the moment of the search. A high bid therefore cannot make up for an irrelevant ad.

One measure of quality is Quality Score, a rating from 1 to 10 for each keyword. According to Google Ads Help, it is based on three components: expected click-through rate (CTR), ad relevance and landing page experience.

Google itself says that a highly relevant ad can win a higher position at a lower price than a competitor with a higher bid, as set out in Google's description of the ad auction. That mechanism is what makes the channel accessible to smaller companies.

A simplified worked example, with made-up figures to show the principle: a competitor bids SEK 25 per click with a quality of 4 (25 × 4 = 100). You bid SEK 15 with a quality of 8 (15 × 8 = 120). You rank above the competitor with a bid that is 40 per cent lower. In practice Google factors in more than that, but the principle holds: relevance beats budget.

If you are about to start, the lesson is this: spend your time matching keywords, ad copy and landing page. That lowers the price per click more than any bidding trick.

Which campaign types are there, and which one suits you?

Google Ads has five main campaign types. They solve different problems and suit accounts at different stages of maturity.

• Search campaign: text ads in the search results. Captures people who are actively looking for what you sell. The right starting point for most service companies and B2B businesses.
• Shopping: product ads with image and price; requires a product feed in Merchant Center. An obvious choice for e-commerce.
• Display: banner ads on websites in Google's network. Builds awareness but captures low purchase intent; rarely the right choice for your first campaign.
• Video (YouTube): video ads for building awareness and re-engaging previous visitors.
• Performance Max: an automated campaign type that shows ads across all of Google's channels at once. Powerful with the right data, risky without it. More on that below.

Our recommendation for growing companies: start with a search campaign targeting the keywords closest to a purchase. It is the easiest to understand and troubleshoot, and it shows you what the market is actually searching for.

Why can Performance Max get expensive for beginners?

Performance Max is run almost entirely by Google's algorithm. You set goals, budget and ad assets, and the system picks channels, searches and bids for you. It sounds convenient, and for new accounts that is exactly the risk.

The algorithm optimises towards your conversion data. If the account lacks accurate conversion tracking, or has too few conversions to learn from, the system is optimising blindly. The budget can then go on traffic that looks good in the reports but never turns into business, and you do not have the data to spot it.

Transparency has improved in recent years: Performance Max now has a search terms report and a channel breakdown across Search, Shopping, Display and YouTube. But the picture is still less detailed than in a search campaign. The search terms report lacks some conversion data, and Google itself describes the placement report as a brand safety tool rather than a performance tool. You still cannot tie cost to an individual search or placement as precisely as you can in a search campaign.

Our recommendation: start with a search campaign, build up conversion data and test Performance Max only once your tracking has proved reliable. The exception is e-commerce with a product feed, where Performance Max often makes sense earlier, but the same rule applies: tracking first.

Is advertising on Google right for your company right now?

Advertising on Google works best when three things are true at once: there is active search demand for what you sell, your margins can absorb the cost of every visitor, and your website can turn visitors into business.

If there is no search demand (for a completely new product category nobody has heard of, say), search ads give a poor return. You then need channels that build awareness first.

If the website converts poorly, you pay for visitors who leave without doing anything. In that case it is often wiser to adjust the offer and landing pages first and increase the ad budget afterwards.

So what does it cost? You control the budget and pay per click, but click prices vary widely between industries; the full breakdown is in What does Google Ads cost?.

What needs to be in place before you start your first campaign?

Five things decide whether your first months produce useful data or just costs. Check them before you switch anything on.

• Conversion tracking. Without it, neither you nor Google's algorithm knows which clicks turn into business. Set up tracking for purchases, forms or calls before you spend a penny; this is the single most important point.
• A landing page that matches the ad. Do not send paid traffic to the home page. Someone who clicks on "bookkeeping help for limited companies" should land on a page about exactly that; otherwise both your Quality Score and the share of visitors who take action will drop.
• Understand the search intent. The purpose behind the keyword (search intent) decides what the ad should promise. Someone searching for "what is a VAT return" wants to learn, not buy; do not pay for informational searches when you want customers.
• Negative keywords. A list of searches you do not want to pay for, such as "free", "jobs" or terms from the wrong industry. You will keep adding to it, but it should be there from day one.
• The profitability calculation. Work backwards: what is a new customer worth, what conversion rate is realistic on your landing page, and so what can you afford to pay per click? Without that calculation, you cannot tell whether the campaign is profitable.

How do you get started, step by step?

A sensible start for a smaller account looks like this:

• 1. Create the account in expert mode. Google's simplified "smart" mode hides the settings you need to control; choose expert mode from the start.
• 2. Set up conversion tracking. Before anything else. Check that a test conversion is recorded.
• 3. Do keyword research. Identify the searches closest to a purchase, flag the informational ones and filter them out.
• 4. Start narrow. One campaign, a few tightly grouped ad groups, phrase match or exact match. Broad match can wait until you have data and negative keywords in place.
• 5. Write ads that mirror the keyword. The keyword should be recognisable in the headline, and the landing page should deliver on the ad's promise.
• 6. Set a daily budget you can live with during the learning phase. The first weeks are data collection; do not expect profitability from day one.
• 7. Review the search terms report every week. It shows the actual searches your ads appeared for. Add negative keywords and move budget towards what converts.

What are the most common beginner mistakes?

A real example from a thread on a Swedish business forum: a new online shop spent SEK 1,000 a month on ads, made a single sale worth SEK 250 and ended up several hundred kronor down. The conclusion was that "Google Ads doesn't work". But the problem is rarely the channel. Without conversion tracking there was no way to see which keyword produced the sale, the budget was spread across broad keywords, and the margin on a single order could never cover the cost per click.

The same pattern runs through the most common mistakes:

• Advertising without conversion tracking. You end up optimising for clicks and gut feeling instead of business.
• Broad keywords with broad match from the start. The budget leaks to irrelevant searches before you have had time to build up a protective list of negative keywords.
• All traffic to the home page. Generic landing pages lower both Quality Score and the share of visitors who take action.
• No negative keywords. You pay for "free" searches and the wrong audience without noticing.
• Judging too early, or changing too often. Do not judge the campaign on a few days' data, and do not keep resetting the learning with constant changes. Wait until you have enough clicks to see patterns.
• Ignoring the margin. A high CTR and cheap clicks do not help if every deal loses money. The profitability calculation in the checklist above is your safeguard.

Should you do it yourself or hire an agency?

A rule of thumb, without exact figures: run it yourself if the budget is small, the offer is simple and you have time to learn the tool. At that level, your own mistakes usually cost less than an ongoing fee, and you build an understanding of your own market that is valuable whatever you decide.

An agency starts to pay off when the account has grown to the point where a specialist's improvements are worth more than the fee, when you run several campaign types in parallel, or when you simply do not have the time. The comparison is always the same: what the help costs against what the improvement is realistically worth on your budget.

An honest caveat: most of the people writing about this are agencies with a stake in the answer, and that includes us. That is exactly why a middle ground is often the wisest choice, and it is how we work with smaller budgets ourselves: a fixed-price set-up as a one-off project (account, tracking, campaign structure and keywords in place from the start), followed by a few follow-ups billed by the hour, where we clean up the search terms report, add negative keywords and adjust bids. That gives you most of the quality of agency work without tying you to an ongoing fee. Paying a fixed fee for continuous optimisation to squeeze out the last few per cent usually only pays off at larger monthly budgets; on a small budget, endless fine-tuning is rarely worth it. The full cost calculation is in What does Google Ads cost?. Here is what our set-up looks like: Google Ads agency – set-up and management.

Finally, advertising on Google and SEO are not competitors. Ads quickly show which keywords and messages convert, and that data sharpens your organic work. Wondering whether the channel is right for you right now? Get in touch and we will think it through with you, no strings attached.