How labels work
A label is a short tag attached to a campaign, ad group, keyword or ad. It changes nothing about how that entity runs — it has no effect on bidding, targeting or the auction — but it gives you a reliable way to select those entities again later.
Once applied, a label becomes both a filter and a reporting dimension. You can view results by label, make a bulk change to everything carrying one, and reference labels inside automated rules and scripts. An entity can hold several labels at once, so the same campaign can be tagged as a test and as a priority without anything being duplicated.
Why labels matter
Labels do the jobs structure cannot. Structure is dictated by the settings a campaign needs — budget, market, schedule — so it cannot also express the things that cut across it, such as which campaigns belong to one product launch or which are being tested this quarter.
That is where a label earns its place. Tag every campaign in a launch and you can report on the launch even though its campaigns sit in different markets on different budgets. Tag the experiments and you can find them all again when the test ends, which is exactly the moment people forget what they changed.
They also make bulk work safer. Selecting everything with a given label beats picking rows by eye out of a long list, and it is repeatable, which matters when the same change has to be made every month.
Common mistakes with labels
The most confusing overlap is with Merchant Center custom labels. Those are feed attributes used to segment products for Shopping and Performance Max. Account labels are tags on advertising entities. The names look alike and the jobs are not the same.
The second mistake is a label list that grows and is never pruned. When everyone adds their own, you end up with several tags meaning the same thing and filters that quietly miss rows. Keep the list short, agree who may add to it, and remove labels once whatever they marked has finished.
The third is using labels to paper over a weak account structure. A label cannot give a campaign its own budget or its own location settings, so if you are tagging campaigns because you cannot steer them separately, the real fix is structural.
How to act on it
Decide what you will want to group later, then label for exactly that: tests and when they started, launches, seasonal pushes, the client or brand where one account covers several, and anything a rule or script has to select without fail.
Apply labels while you build rather than afterwards, because retro-labelling a large account is the task nobody gets round to. Google Ads Editor makes bulk labelling manageable when you do have to catch up. Keep the vocabulary aligned with your naming convention so filtering either way gives the same answer, and review the list whenever you review the account.