Google AdWords:

AdWords is Google’s system to allow advertisers to place ads on Google’s search result pages which are relevant to the search performed by the user. For every click on his ad the advertiser pays a fee to Google (Pay-per-Click advertising). In setting up his AdWords campaign an advertiser determines for what keyword s he want his ads to be shown and the maximum price he is willing to pay for a click. If his ad has a chance to appear for this price and in what position depends on how many other advertisers are there for any given keyword and how much are they willing to pay.

An AdWords ad consists of a headline of max. 25 characters, 2 lines of text with max. 35 characters each and a URL to which the user is directed when he clicks on the ad.

Google’s search results pages are divided up into two sections. In the middle are the so called organic search results with Google’s evaluation of the most relevant websites for the user’s search. On the right are the sponsored advertisements – the AdWords.

The top ad is the one with the best performance from Google’s viewpoint – that means that the ad is making the most money for Google. This is determined by two factors:

1) the maximum bid of the advertiser and

2) the click through rate (CTR) .

If the maximum bid for ad A is $1 but it’s CTR is only 1% while ad B’s max bid is only $.50 with an CTR of 5% B will take the better position because for 100 ad impressions Google earns $2.50 for ad B but only $1 for ad A.

Google requires a minimum bid of 5 ct but even with that an advertiser’s budget can go out of control pretty fast. Therefore Google allows to limit his daily budget to a certain cost. If the limit is reached the ad is not displayed any longer for this day.

[Note: There has been a major change in AdWords policies in June 2006 which massively affects bid prices. For more information see the entries Google Slap and Landing Page.]

Google AdWords is an immensely popular advertising system. A webmaster might prefer a high position in the organic search results because he doesn’t have to pay for this kind of traffic (at least not directly to Google for every click on his link but most probably for all the SEO actions necessary to make it to a high position). However, the process of gaining such high positions can take weeks if not months or even years. With AdWords he can generate a lot of traffic from Google from the first day his website is online. He just needs to set up an AdWords campaign.

A word of warning: Google AdWords can be a great way to generate traffic to and profits from a website but if you don’t know the tips and tricks it can be a very disappointing experience. Like a well known Internet marketer stated it: “95% of the PPC advertisers throw several hundred dollars down the drain before they get wise enough to learn how Google AdWords really works. Or they never learn the basics and soon quit.”

This has happened so often – especially to so called newbies – that Google AdWords has often been referred to as “The Newbie Graveyard”.

It is definitely not a subject to “just get started and see where it goes”. So it is very recommended to learn the AdWords basics first.

 

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