How Google Ads Works

At a glance

Every search runs an auction. Your position depends on Ad Rank: your bid combined with the quality and relevance of your ad and page. A better ad can beat a bigger bid. Start with Search campaigns. They catch people actively looking for what you sell. Performance Max and YouTube come later. Use phrase and exact match at launch. Broad match and AI Max need solid conversion data to behave. Quality Score is a diagnostic, not a target. If it's low, it's telling you the ad or page doesn't match the search. Bidding follows data: manual or simple bidding while conversions are scarce, Smart Bidding once you have a steady flow.

This lesson covers the minimum you need to set up a campaign without making expensive mistakes. Skim it now and come back to a section when the Quick start sends you here.

Campaign types: which one when

Google Ads has several campaign types. For B2B software, three matter, and in a clear order.

Type Where ads show Use it for When to start

Search Google search results (and optionally Search Partners) Capturing people who search for your category, the problem you solve, or competitors Week one

Performance Max Search, YouTube, Display, Discover, Gmail, Maps, chosen by Google Extra reach once conversion tracking reflects real pipeline, not just form fills Only after Search works and offline conversions flow

YouTube (via Demand Gen or video campaigns) YouTube, and with Demand Gen also Discover and Gmail Awareness in a target segment and remarketing to site visitors Once Search is producing steady leads

The reason Search goes first is intent. Someone searching "SOC 2 compliance software" has a problem right now. Someone watching a YouTube video does not. With a small budget, you want to pay for the first person. See Beyond Search for when the other types earn their place.

How an account is organised

An account contains campaigns, which hold budget, bidding, location and network settings. Campaigns contain ad groups, which hold a tight set of keywords plus the ads that show for them. Keep each ad group to one theme so the ad can speak directly to the search. "Expense approval software" and "corporate card software" are two ad groups, not one.

How the auction works

Each time someone searches, Google finds every ad whose keywords match, then ranks them. The ranking score is Ad Rank. Google doesn't publish the exact formula, but the main inputs are your bid, the expected quality of your ad (how likely it is to be clicked and how relevant it is), the landing page experience, and context like device, location and time.

Search: “expense approval software” A: bid high, weak ad B: bid medium, strong ad C: bid low, decent ad

2nd

1st

3rd

Bid

Quality and relevance (ad, page, expected CTR)

Top

Replay Illustrative only. Advertiser B bids less than A but wins the top spot because its ad and landing page are a better match for the search. You usually pay just enough to hold your position, not your full bid.

Two things follow from this. First, you can't simply buy the top spot with money if your ad is a poor match. Second, improving the ad and page lowers what you pay for the same position. That's why ad groups stay tight and landing pages repeat the ad's promise.

Go deeper What you actually pay per click

Search ads are priced per click. Your actual CPC is roughly the minimum needed to keep your Ad Rank above the advertiser below you, so it's usually below your max bid. With Smart Bidding, Google sets the bid for every auction and you control it indirectly through targets and budget. Your ad can also fail to show at all if its Ad Rank is below a threshold, even with no competitors. That's one reason a very low bid on a niche keyword can get zero impressions.

Keywords: what to bid on

Keywords are the searches you want to appear for. For B2B software, sort candidate keywords by intent and start at the top of this list:

Category plus buying words: "expense management software", "best SOC 2 compliance tool", "invoice automation pricing". Highest intent, usually highest CPC, and worth it. Problem phrases: "automate invoice approvals", "how to track employee expenses". Good intent, but more researchers and students mixed in. Competitor names: people evaluating a rival. Useful but needs care; see Advertising against competitors. Your own brand: cheap and protects you from competitors bidding on your name. Run it in its own campaign so it doesn't flatter the non-brand numbers.

Skip broad informational terms ("what is accounts payable") at launch. They bring traffic, rarely bring leads, and eat a small budget fast.

Starter budget: 10 to 25 keywords in one or two ad groups is plenty. If Keyword Planner shows a keyword costing more than about a tenth of your daily budget per click, you'll get very few clicks a day from it; pick narrower, cheaper variants or accept a slow start.

Intermediate budget: 3 to 6 ad groups of 10 to 20 keywords each, one theme per ad group. Brand keywords go in a separate campaign.

Advanced budget: you'll likely run several themed campaigns (brand, category, problem, competitor) per region group. Keep themes consistent across regions so you can compare them.

Match types

A match type tells Google how loosely to interpret a keyword. All three now match on meaning, not exact wording, so even exact match catches close variants and synonyms.

Match type How you write it Can match Use it

Exact [invoice approval software] "invoice approval software", "software for approving invoices" Your best-converting terms; tightest control

Phrase "invoice approval software" "best invoice approval software for SMB", "invoice approval software pricing" Default at launch; captures useful variations

Broad invoice approval software "AP automation", "accounts payable workflow", sometimes "invoice template free" Later, with Smart Bidding and plenty of conversions

Broad match isn't bad. It finds searches you'd never think of, and with good conversion data, Smart Bidding can filter out the poor ones. Without that data, it spends on loosely related searches and you find out in the search terms report a week later. Hence: phrase and exact first, then test broad in one ad group once bidding has something to learn from.

AI Max and automatic upgrades AI Max for Search is a setting on Search campaigns that expands matching beyond your keywords, rewrites ad text from your site and can send people to different landing pages. Between 1 and 30 September 2026, Google automatically upgraded Search campaigns that used campaign-level broad match or automatically created assets to AI Max, unless the advertiser had switched those settings off first. Upgraded campaigns that used automatically created assets got search term matching and text customisation turned on; broad match campaigns got search term matching only. Dynamic Search Ads are due to move to AI Max from February 2027. If your account used either setting, open the campaign settings and check whether AI Max is now on. As of October 2026 For launch, check the campaign settings: AI Max off, automatically created assets off, campaign-level broad match off. Treat AI Max as an experiment to run later, with a solid negative keyword list and conversion tracking based on qualified leads.

Quality Score

Quality Score is a 1 to 10 rating shown per keyword, built from three parts: expected click-through rate, ad relevance, and landing page experience. Each part is rated "below average", "average" or "above average". Add the Quality Score columns in the Keywords view to see them.

Use it as a pointer to the problem, not a goal:

Ad relevance below average: the keyword doesn't appear in or fit the ad. Split the ad group or write a headline that uses the searcher's words. Expected CTR below average: the ad isn't compelling for that search. Test a sharper headline, add sitelinks, or check that the keyword really fits. Landing page experience below average: the page is slow, doesn't match the ad, or is hard to use on mobile. See Landing pages.

Don't chase a 10. A keyword with a Quality Score of 5 that produces qualified demos is worth more than a 9 that produces nothing.

Bidding: which strategy for your budget

Bidding decides how much you offer per auction. There are two families:

Manual CPC: you set a max CPC per keyword or ad group. You keep full control, and bid adjustments by location, device and schedule apply. It works with very little data. Smart Bidding: Google sets a bid for every auction using signals you can't see (device, location, time, browser, past behaviour) to hit a goal. The main options are Maximize conversions, Target CPA, Maximize conversion value and Target ROAS. It needs conversion data to work well.

Maximize clicks also exists. It is useful for a few weeks to gather data cheaply if you set a max CPC cap, but it optimises for clicks, not leads, so don't leave it on.

Your band: Starter Start on Manual CPC (or Maximize clicks with a max CPC cap). With fewer than 15 to 20 conversions a month, Smart Bidding has too little to learn from and swings wildly. Set max CPCs from Keyword Planner's top-of-page range, then adjust weekly by keyword: lower bids on keywords that spend without converting, raise them slightly on ones that convert. Once you reach roughly 15 or more conversions in 30 days, switch to Maximize conversions. Leave the target CPA empty for the first few weeks after switching.

Your band: Intermediate Start on Maximize conversions without a target, provided conversion tracking is verified. After two to four weeks with 30 or more conversions a month, add a Target CPA close to what you're actually getting, then tighten it in steps of 10 to 15%, waiting a week or two between changes. If conversions are thin in one campaign, consider a shared portfolio strategy across campaigns so they learn together.

Your band: Advanced Use Target CPA on qualified conversions from the start if the account has history, and plan the move to Target ROAS or Maximize conversion value once CRM outcomes with values flow back as offline conversions. Value-based bidding is where B2B accounts at this spend make the most progress, because it stops Google treating a student sign-up and an enterprise demo as equal. Use campaign experiments to test bid strategy changes rather than switching the whole campaign.

Recent bidding changes to know

As of October 2026

Enhanced CPC is gone for Search and Display. Campaigns still on it were moved to Manual CPC from March 2025. New labels: from June 2026, "Maximize conversions with a target CPA" is shown as Target CPA, and "Maximize conversion value with a target ROAS" as Target ROAS. The behaviour is the same. Targets are now a setpoint for budget-limited campaigns: from 17 August 2026, a budget-limited campaign with a Target CPA or ROAS aims for the target you set rather than beating it. If you set a $200 target CPA but were getting $120 leads, expect costs to rise toward $200. Set targets at what you actually want to pay, or use Maximize conversions without a target if you'd rather spend the budget as efficiently as possible. Smart Bidding ignores most bid adjustments. Google’s own table shows location, schedule and audience adjustments are not used by Target CPA, Target ROAS, Maximize conversions or Maximize conversion value, and not by Maximize clicks either. A -100% device adjustment still excludes that device. To control regions under Smart Bidding, use separate campaigns or conversion value rules; see Geographic targeting.

Go deeper Why Smart Bidding needs volume, and what 'learning' means

Smart Bidding predicts the chance each auction leads to a conversion. With few conversions, its predictions are noisy, so bids swing. After a big change (new strategy, target change over about 20%, new conversion action), Google shows the strategy as "Learning" for about a week while it recalibrates. Results during learning are not a fair read, which is why you change one thing at a time and wait. The common rule of thumb is about 30 conversions a month per campaign for Target CPA and more for Target ROAS. Google doesn't require that, but below it results are less stable. Grouping campaigns into a portfolio strategy pools their data. The conversion you bid on matters more than the strategy. If your primary conversion is "any form fill", Smart Bidding will find the cheapest form fills, which are often students and job seekers. That's why Tracking pushes you to send qualified outcomes back from the CRM.

Setting up the account

If your company has no Google Ads account yet, set one up properly before the first campaign. Most problems people hit on day 1 come from three defaults: the Smart campaign flow, the wrong currency or time zone, and everyone sharing one login.

Expert mode, not Smart mode

The sign-up flow starts by building a Smart campaign: Google writes the ads, picks the searches and shows them across its networks. It is built for small local businesses and gives you almost none of the controls this course relies on (match types, negative keywords, location options, networks). On the first screen choose Switch to Expert mode, then Create an account without a campaign. If an account was already created in Smart mode, open the settings (gear) menu and choose Switch to Expert mode, then pause any Smart campaign it made. The menu labels move around, so search the Google Ads help for "Switch to Expert Mode" if you can't find it. As of November 2026

Billing and payment

Billing country, currency and time zone are set once and cannot be changed. If a different legal entity pays for a region (for example an EU subsidiary paying in EUR), that region usually needs its own account. Automatic payments (charged when costs reach a threshold or monthly) work with a company card and are the fastest way to start. Monthly invoicing needs an application and a credit check, and suits steady spend. Google charges no more than the monthly charging limit for a campaign (see Budget Decisions), but card limits and failed payments stop ads, so give finance billing access and an alert. Advertiser verification: Google asks most advertisers to verify the business and the people behind it. Have the company registration details ready.

Who gets which access level

Access levelWhat it can doGive it to

AdminEverything, including managing users, linking GA4 and other products, and manager account linksTwo people at most, so access never depends on one person StandardEdit campaigns and billing, make payments, create conversionsThe people who build and run campaigns, and agencies Read onlySee campaigns, tools and reports, no changesSales leadership, analysts, anyone reviewing results BillingBilling information, payments and billing reportsFinance Email onlyNotification emails and scheduled reportsPeople who only need the weekly report

Invite people by their own work email in Admin, then Access and security. Never share one login: you lose the change history that tells you who changed what. As of November 2026

When a manager account is worth it

A manager account (formerly MCC) is a separate login that holds several Google Ads accounts. You do not need one for a single account. It is worth setting up when:

you run separate accounts per region, currency or legal entity and want one place to see them all; an agency or freelancer works on your account (they link their manager account and you keep ownership); you want shared negative keyword or exclusion lists, and conversion tracking, managed across accounts.

Keep your company as the owner of every account. If an agency creates the account under their manager account, ask for admin access for two of your own people on day one.

Do this now

Confirm your first campaign is a Search campaign, with Performance Max and YouTube parked for later. Draft 10 to 25 high-intent keywords in one or two themes, phrase and exact match only. Add the Quality Score columns to your Keywords view so you can check them after week one. Set the campaign to Manual CPC (or Maximize clicks with a CPC cap) and note the date you expect to reach 15 conversions. Set Maximize conversions without a target; diarise a review at 30 conversions to add a Target CPA. Pick Target CPA or Target ROAS based on account history and check targets reflect what you actually want to pay after the August 2026 change. Check campaign settings: AI Max, automatically created assets and campaign-level broad match are off.

Next: Messaging