The search ads that appear in the SERPs are a great option when you know there is demand for your product and your target audience is using search engines to meet it.

The ads on the Google Display Network – also known as banners or display ads – are more visual and are perfect for grabbing attention when you’re “renting” an area where your audience is online.

Google actually has another advertising program that came out three years after Google Ads launched. It’s called Google AdSense.

What is Google AdSense?

With Google AdSense, publishers can place ads on their websites and other “properties” for a “commission”. These publishers form part of the Google Display Network that advertisers can use through Google Ads.

In the image below, the recipe website is using Google AdSense to allow 2 advertisers to place banner ads on their website. The recipe page is paid by Google for the success of these ads. (Later more.)

Google AdSense is ideal for website publishers who are already getting traffic and want to monetize it.

Read on as we look at the key differences between Google Ads and AdSense, what they target, and what their cost structure is like.

Ads (formerly AdWords) vs. AdSense

While the Google Ads program is designed to attract advertisers, the Google AdSense program is designed to attract publishers. Advertisers use Google Ads to drive traffic to their websites, and publishers use Google AdSense to monetize their existing traffic.

Below, we’ve highlighted some key differences between Google advertising options so that you can decide how best to distribute your ad budget.

purpose

platform purpose
Google Ads (search) Use Google as a search engine to generate traffic to your own website.
Google Ads (ad) Generate traffic to your own website from the Google Display network of publishing partners, mobile apps and videos.
Google AdSense As a publishing partner to the Google Display Network, generate traffic for other websites.

strategy

platform strategy
Google Ads (search) You know that your target audience is searching for your product or service on Google and you want to appear in the SERPs for those queries.
Google Ads (ad) Your target audience may not know your product or service and not search for it on Google. However, a visual indicator can be eye-catching if it can appear on the websites it is on.
Google AdSense Your website is generating traffic and you want to monetize it. You don’t mind “renting” real estate on your website to advertisers that your audience may find interesting.

Cost structure

platform Cost structure
Google Ads (search) You pay a fee every time a user clicks one of your ads. This cost-per-click (CPC) can vary based on bid, ad rank versus competition, and quality score. Because of this, more competitive keywords can have a higher CPC.
Google Ads (ad) You can choose the right price for your goals: pay with cost per click (CPC), cost per 1000 impressions (CPM) or cost per action (CPA). CPC is better for traffic generation, CPM is better for awareness generation, and CPA is better for conversions.

According to Google, you bid for the placement and “the auction winner pays the minimum required to outperform the next advertiser in the auction.” Competition drives the bidding process, so the industry and sought-after publications may cost more.

Google AdSense AdSense is free to join and you receive a commission on the clicks, impressions, and other interactions that the ads on your website receive from users. Because of this, your audience, ad placement, and ad quality determine how much you can make from AdSense.

As you can see from the table above, the cost structure depends on a number of variables. We’ll get into this in more detail below, starting with Google Ads.

Google Ads (search)

Of course, there is a huge demand for the best ad placements. Therefore, Google always triggers an auction when at least two advertisers bid for keywords that relate to search queries that users regularly enter on Google.

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Advertisers can then group keywords and the corresponding ad copy and webpage, select the group they want to bid on, and choose their maximum bid. Next, Google selects a keyword from the advertiser’s ad group that is most relevant to users’ searches and takes part in the auction.

However, a Google auction is not like a typical antiques auction. They want to level the playing field when it comes to capitalizing on the size of their reach. Instead of the highest bidder always winning the auction, the bidder with the highest ad rank always wins.

AdRank is calculated by multiplying your maximum cost-per-click bid by the Quality Score of your ad. This is calculated by measuring the relevance of your page to the keyword, user experience and click rate. This means that just because they have the largest ad budget, companies can’t get the top ranking for every keyword they want. Your content needs to be engaging.

Google Ads AdRank

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Google Ads aims to encourage the best advertisers to promote the best content on their search engine results pages. Therefore, they reward high quality ads with higher ad placements and lower cost per click.

With that in mind, they also want to stop bad advertisers from promoting bad content. As a result, advertisers with low quality scores typically only get a high ad position if they pay a high cost-per-click bid. If you want to cut a cost-per-click price, you have to be content with bending down at the bottom of the ad ranking.

When you win a Google auction, your actual cost-per-click is calculated by the second highest ad rank divided by your Quality Score plus one cent. You only pay your maximum bid if you are the only bidder in the auction or if you make the highest bid in the auction but have the lowest Ad Rank. In this case, you will get the last ad rank.

Google Ads Bid Pricing

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Google Ads (ad) / Google AdSense

With display ads, just like with search ads, advertisers bid on the publisher’s ad space in the Google Ads auction. You are bidding on certain keywords. If a publisher’s content contains the same or similar keywords, Google sells its ad space to the highest bidder and pays the publisher a small fraction of the bid when people click the ad on their website.

However, AdSense does not optimize the ads that appear on the publisher’s website for maximum return on investment, like Google Ads does for its search engine advertisers when they want to optimize their advertising campaigns. So the amount a publisher can earn from AdSense essentially depends on how well they are placing the ads on their website and how well advertisers are able to produce their ads.

However, publishers have control over the types of ad displayed. You can choose from text ads, display ads, rich media ads, and more. You can also customize the style of your ad or create your own which allows you to change the size, color, text, background and border details of the ads that appear on your website. In addition, they can only place three content ads, three link ads and two search fields on each of their websites.

Google Ads (both search and ad) and Google AdSense are effective ways to generate income from digital advertising methods – the former when you drive traffic to your website and the latter when you use your website to drive traffic elsewhere to steer.

Once you have selected the programs that are right for you, it is time to begin your strategy and execution.

Editor’s Note: This post was originally published in March 2019 and has been updated for completeness.

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