Module 1: PPC Foundations

How Google Ads Auctions Work

Every time someone types a search into Google, an auction runs in a fraction of a second to decide which ads appear, in what order, and what each advertiser pays. If you do not understand this auction, you will make expensive guesses: raising bids when the real problem is a weak ad, or blaming Google when the problem is your landing page. Once you understand it, most of the decisions in this course become logical.

Pay per click, not pay per view

Google Search ads are sold on a pay per click (PPC) basis. Your ad can appear many times without costing you anything; you are charged when someone clicks. This is why PPC suits small businesses: you pay for visits from people who searched for something related to what you sell, not for general exposure.

Three terms you will see every day:

• Impression: your ad was shown once.
• Click-through rate (CTR): clicks divided by impressions. 50 clicks from 1,000 impressions is a 5% CTR.
• Cost per click (CPC): what you paid for a click. Your maximum CPC is the most you are willing to pay; your actual CPC is usually lower.

Ad Rank: why the highest bid does not always win

Google does not simply sell the top spot to the highest bidder. If it did, users would see irrelevant ads and stop clicking, which would hurt Google too. Instead, each eligible ad gets an Ad Rank. Google describes Ad Rank as being based on several factors:

• Your bid: the maximum you are willing to pay for a click.
• The quality of your ad: how likely it is to be clicked and how relevant the ad and landing page are to the search.
• Ad Rank thresholds: minimum quality levels an ad must meet to show at all, or to show in higher positions.
• The context of the search: the words used, the user's location, device, time of day and other signals.
• The expected impact of assets: how much extras such as sitelinks and phone numbers are likely to improve the ad's performance.

The practical lesson is simple: quality is a lever just like money. A relevant, useful ad with a matching landing page can beat a competitor who bids more.

What you actually pay

Google uses a form of second price logic. Roughly, you pay the minimum needed to hold your position, which depends on the Ad Rank of the advertiser just below you and on the thresholds. That is why your actual CPC is normally below your maximum bid. Google does not publish the exact formula, so treat this as a principle rather than a calculator.

Worked example: two Nairobi plumbers

Imagine two plumbing businesses in Nairobi both bidding on the search "emergency plumber Westlands". These figures are hypothetical and simplified for illustration.

Plumber A bids more, but Plumber B's ad matches the search exactly, the landing page delivers what was promised, and the call asset makes it easy to act. Plumber B is likely to have higher expected CTR and relevance, so it can win a higher position while paying less per click. Plumber A's instinct will be to raise the bid to KES 120. The better move is to fix the ad and landing page first.

The auction happens per search

There is no fixed "position 1" that you buy for a month. The auction runs again for every search. The same keyword can show your ad at the top in the morning on mobile in Kilimani and not at all in the evening on desktop in Mombasa, because the context changes. This is why your reports show average figures and why you should judge performance over enough data, not single searches.

Common mistakes to avoid

• Searching for your own ad repeatedly. Each search creates an impression without a click, which can lower your CTR and does not tell you much. Use the Ad Preview and Diagnosis tool instead.
• Treating bids as the only lever. If you are not showing or are showing low, check ad relevance and landing page before adding money.
• Expecting identical results every day. Context changes per search, so look at trends over weeks.
• Chasing the top spot at any cost. Position matters only if the clicks turn into profitable customers.