How Google Ads works, and how to set up your first local campaign

How the Google Ads auction decides whose ad shows

Google runs an auction each time someone searches or opens a page that carries ads, and that auction decides whether your ad appears and where. Google's own explainer of how the Google Ads auction works says it happens on every search on Google and every visit to a site that shows ads, with a separate auction for each ad spot on the page.

The score that sorts the ads is called Ad Rank. Google describes it as a set of values used first to decide whether an ad is eligible to show at all, then recalculated to rank the eligible ads against each other. Your bid is one input. The rest are things a trade business has more say over than most owners expect: how relevant the ad and landing page are, the extras attached to the ad such as a call button, and the context of the search. Context covers the words typed, where the person is, their device and the time of day.

Here's the part that changes how you spend. Your bid is the most you're willing to pay for a click, and Google says what you actually pay is often less. Google also says an advertiser can win a higher position at a lower price than a competitor with bigger bids, when the keywords, ads and assets are more relevant. Money still matters. But for a plumber or electrician competing across one region, relevance is the lever you can work on before you ever touch the bid.

Search campaigns are usually bid in clicks, which is where the old name pay per click comes from. With cost-per-click bidding, you pay for each click on your ad. Local Services Ads, a separate Google product, charge per lead instead. Knowing which product you're in tells you what you're paying for.

The table below lists the six Ad Rank factors in Google's help, as read in October 2026, with what each one means for a local service business.

Quality Score is a report card, and it isn't used in the auction

Quality Score is a diagnostic you read after the fact. Google's help on Quality Score for Search campaigns describes it as a rating from 1 to 10 at the keyword level that gives you a sense of how your ad quality compares with other advertisers, and it says plainly that Quality Score isn't an input in the ad auction.

That's worth knowing because plenty of explainers still ranking for this question, some written under the retired AdWords name, teach Ad Rank as bid multiplied by Quality Score. Google's auction page lists the inputs it uses at the moment of each search, and Quality Score isn't one of them. Read it as a summary that points to weak spots, then fix the weak spot.

It has three parts, and each points to a fix a local business can actually make:

• Expected clickthrough rate: how likely your ad is to be clicked when it shows. A low rating often means the keyword is too loose, so the ad appears for people after something else, like a job or a DIY fix.
• Ad relevance: how closely the ad matches the intent behind the search. One generic ad covering every service you offer tends to rate low here, because it can't match any single search closely.
• Landing page experience: how relevant and useful the page is for the person who clicked. Sending a hot water system search to your home page, where hot water is one tile among twelve, is the classic local mistake. The Google Ads landing page checklist covers what that page needs.

Which campaign type suits call-driven service work

For most trades and local services, a Search campaign is the place to start. It shows text ads on Google's results to people who are typing the job they need done, which is the closest match to how someone finds a roofer, a sparky or a mobile mechanic. Google offers several other campaign types, and each is built for a different goal, so it pays to know what you're choosing before you click through the setup screens.

The descriptions in the middle column are summarised from Google Ads Help as read on 26 October 2026. The right-hand column is our view for a business whose leads mostly arrive as phone calls and quote forms.

Local Services Ads deserve their own look, because the pricing, the screening and the way leads arrive are all different from a Search campaign. Our guide to Google Local Services Ads covers them. The rest of this guide stays with a standard Search campaign, the type most local businesses start with.

The default settings that send budget outside your service area

Several settings in a new Search campaign start wide, and each can put your ad in front of people you can't serve. None of them is wrong for every advertiser. They're set for reach, while a local service business usually wants fewer, closer and more urgent searches. At the time of writing (October 2026), these are the settings to check before you launch.

The location option surprises people most. Google's help on advanced location options calls Presence or interest the default and recommended choice. It reaches people likely to be in, or regularly in, your target locations, plus people who've shown interest in them. For a holiday rental, that interest is useful. For a builder who only works within an hour of home, someone researching your region from another state is rarely a job. Presence narrows the audience to people who are, or regularly are, in the area. Location exclusions work on presence either way.

Display Expansion is changing too. Google's help says that when it was switched on, it used unspent Search budget to show ads on the Google Display Network, and that from February 2027, Search campaigns with Display Expansion will move to a new channel prioritisation model. If you take over an older account, open the network settings and check what's ticked instead of assuming.

These settings are also behind most of what our Google Ads wrong leads guide diagnoses in running accounts: calls from suburbs you don't cover, enquiries for work you don't do, and clicks that never become calls. Setting them at the start is a lot easier than finding them three months in.

Your first campaign, in the order to build it

Build in this order: measurement first, then reach, then keywords, then the ads and the pages they point to. Done the other way round, the first clicks you pay for teach you nothing, because nothing is recording which ones turned into calls.

Measurement comes first for a practical reason as well. Google's conversion measurement covers website actions, phone calls and offline sales you import, and its automated bidding strategies use that data to decide what to chase. Google's campaign setup also asks for at least one conversion goal before it will create a Search campaign. If the goal is a page view or a vague click, everything built on top learns the wrong lesson.

A hypothetical example shows the order in practice. Picture a two-person electrical business that works within about 40 minutes of its depot and wants more switchboard upgrades and smoke alarm jobs. Built this way, it would have one Search campaign with Presence targeting over the suburbs it services, two ad groups (switchboard upgrades and smoke alarms), each sending clicks to its own service page, a call asset that shows only during office hours, and call conversions that count only calls longer than the minimum the owner chose. Nothing in that structure is clever. It just matches the settings to the business.

1. Decide what counts as a lead and track it before the first click: a call from the ad, a call to the number on your website, a quote form sent.
2. Turn on call reporting, which uses Google forwarding numbers, and set a minimum call length so hang-ups and wrong numbers aren't counted. Google leaves that minimum to you. If you also run a call tracking service, read how to stop calls being counted twice before you go live.
3. Draw the area: add the places you genuinely service, switch the location option to Presence, and exclude places you never travel to.
4. Choose networks: keep Google Search, untick search partners, and leave the Display Network box empty for now.
5. Build one ad group per service. Google's advice is to give each ad group a narrow theme and, for many businesses, to mirror the website so each ad group represents a different page. Hot water in one ad group, blocked drains in another.
6. Add keywords in phrase and exact match, plus a starter negative list (next section).
7. Write ads that repeat the service and the area. Google notes that using a keyword in at least one headline can make the ad look more relevant to the person searching.
8. Add a call asset and schedule it to the hours you answer. Call assets put a call button under the ad on devices that can make calls, and they can be set to show only on certain days and hours.
9. Set the ad schedule to match, launch, and check the first results within days.

Keywords, match types and a starter negative list

Match types decide how loosely Google can read your keyword. Google's guide to keyword matching options defines them like this: broad match can show ads on searches related to your keyword, phrase match on searches that include the meaning of your keyword, and exact match on searches with the same meaning or intent. Broad match is the default for every keyword you add.

Notice that even exact match works on meaning, not only on the exact words. That's why negatives matter from the first day. For a local service business, phrase and exact match keep early searches close to the job, and the search terms report shows which searches actually triggered your ads once data builds up.

A negative keyword stops your ad showing on searches that contain it. Google's help on negative keywords adds a catch: negatives don't match close variants or other expansions, so you have to add synonyms and singular and plural forms yourself. Google also warns that too many negatives can shrink your reach, so start with a short list of clear misses and grow it from real search terms.

A starter negative list for most trades covers the groups below. Adjust it to your work. If you do sell training or parts, leave those words out.

• Job seekers: jobs, job, apprentice, apprenticeship, salary, wages, hiring, careers.
• Learners: course, courses, training, TAFE, certificate, licence test.
• Do-it-yourself searches: DIY, how to, yourself, tutorial, video.
• Second-hand and free: free, second hand, used, Gumtree, Marketplace.
• Parts and supply: parts, wholesale, supplier, spare, Bunnings.
• Places you don't service: towns, regions or states outside your area.
• Work you don't do: commercial if you only do homes (or the other way round), plus specialist jobs you refer on.

After launch: what to check before judging the results

The first weeks of a new campaign are for checking that the settings did what you meant. Judge whether ads pay after that. Look at three things: where calls and forms came from, what people actually searched, and whether the conversions Google Ads reports match the calls and forms your office received.

Review the search terms report weekly for the first month and add negatives as patterns appear. Google notes that the report lists search terms used by a significant number of people, so it won't show every single search, but the patterns that cost money usually repeat. If enquiries are arriving from outside your area, recheck the location option and the exclusions. If Google Ads reports more conversions than your phone log shows, fix the call counting before you trust any automated bid strategy, because that bidding learns from the conversions you feed it.

Budget questions are left out of this guide on purpose. What a click costs depends on your trade, your area and who else is bidding in each auction, and any figure printed here would be wrong for most readers within months. Nobody can promise a set number of leads from ads either. If you want a view on spend for your own business and area, talk to us through our Google Ads service.

If you're still deciding between paying for clicks and building organic rankings, SEO vs Google Ads compares the two for local businesses. And to follow an ad lead through to the job it became, see paid and organic lead attribution.