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How does PPC work?

[ Edited ]
Visitor ✭ ✭ ✭
# 1
Visitor ✭ ✭ ✭

Hello, I am looking to start AdWords for my company. I am asking how you pay for AdWords? Say you set a 10/day budget, once that budget is reached per day or month, does it keep charging you? Does it shut off at your limit? As well, If you don't meet your budget, do you get a refund of a sort, or it just will charge you whatever you spent?

New at this.
Thank you.

How does PPC work?

Participant ✭ ✭ ☆
# 2
Participant ✭ ✭ ☆

Hi Spec,

Once your daily budget is over your campaign will be paused for that day,won't charge you any extra. If you have some amount left and you don't want to run campaign anymore then you have to cancel your account you will get refund.


Google adwords is very transparent medium of advertising, there is no hidden charge and you can control each and everything in your Adwords account.


Hope this helps.



How does PPC work?

Badged Google Partner
# 3
Badged Google Partner

Hello @Spec T,

The key to how Google AdWords works is the Quality Score. Quality Score is generally how well an ad group, keywords, ad, and landing page relate to what a person is searching for, and how likely someone is to click on the ad. Here is Google’s page for “Check and understand Quality Score.”

Now every time someone does a search on Google, an AdWords auction is created. Every advertiser who has a keyword match to the search query competes in the auction. How well each advertiser competes is based on their Ad Rank. Again, using a slightly simplified version:

Ad Rank = Quality Score * Bid

Ads are placed in order based on Ad Rank. The highest Ad Rank gets the top spot and so on down to either the last ad qualifying for the auction or the last position on the page.


What an advertiser actually pays is the lowest amount necessary to beat the Ad Rank of the competitor below them. This is called the discounter, and there are a few questions on every certification exam related to understanding this. In a lot of ways, understanding this information is the key to really unlocking AdWords. Every time I’ve presented this in a training class or seminar, a majority of the people about fall out of their chairs.

$$ = Ad Rank to beat / Quality Score + $0.01.

Let’s put this into action using real examples and I’ll show what I mean about the importance of Quality Score (QS).

+virginia +beach+house +for +sale has a QS = 8

Let’s say we want to show up in the 1st position on the page no matter what. We can’t guarantee this, but we can certainly be pretty certain by over bidding the keyword to say $100/click.

Ad Rank = 800 = (QS 8 * $100 Bid)

To beat us, a competitor would have to get an ad rank > 800. This means even if they had a QS10 keyword, they would have to bid $80.01/click to get the top spot. Assuming they have a more realistic bid of $10/click, the amount we would pay in the auction is calculated as follows.

Ad Rank to beat = 100 = (QS 10 * $10 Bid)

$10.00 = 100 / 10 + $0.01 = (100 Ad Rank to beat / our QS 10 + $0.01)

Here’s where it really gets interesting; the person in the top spot could actually pay LESS than the people in the spots below them.

Crazy, right? Here’s why that happens. Assume the same crazy $100 bid for the top spot, but now let’s say the next competitor only has a Quality Score 5 keyword on a $10 bid, the position 3 person has a QS 7 keyword on a $7 bid and the position 4 person has a QS 5 keyword on a $9 bid.

Position 1:

Ad Rank to beat = 50 = (QS 5 * $10 Bid)

$6.26 = 50 / 8 + $0.01 (50 Ad Rank to beat / our QS 8 + $0.01)

Position 2:


Ad Rank to beat = 49 = (QS 7 * $7 Bid)

$9.81 = 49 / 5 + $0.01 (49 Ad Rank to beat / #2 QS 5 + $0.01)

Position 3:

Ad Rank to beat = 45 = (QS 5 * $9 Bid)


Syed Sayem Mustafa

$12.51 = 100 / 8 + $0.01 = (100 Ad Rank to beat / our QS 8 + $0.01)

So even though we bid $100, we only pay $12.51.

If our Quality Score on that keyword in that auction was 10, then the amount we would pay is:


Marked as Best Answer.
Accepted by MosheTLV (Top Contributor)
October 2016

How does PPC work?

Explorer ✭ ✭ ☆
# 4
Explorer ✭ ✭ ☆

Hi Spec,


Along with the great advice above, I would recommend that you read through the starter's guide before you embark, wouldn't want you wasting money.


Hope this helps,