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Google AdWords is the world leader in pay-per-click advertising.
Currently it has more than 150,000 advertisers.
The ads show not only with Google search results, but also with Google’s partners that include AOL search, About.com and thousands of other websites that publish AdWords ads. Google has an interesting ad ranking system.
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It ranks ads not by the bid (the amount their owners are ready to pay for one click), but by the combination of the bid and the click-through ratio.
This way, Google maximizes its revenue stream (since Revenue to Google = Bid x CTR x Views) and gives small advertisers an opportunity to effectively compete with big companies.
A small advertiser cannot compete on the cost-per-click basis, but can successfully overcome any big company in terms of click-through ratio.
AdWords ads can only contain 95 characters: 25 for the headline, then two 35-character-long description lines, and then a visible URL field.
AdWords gives advertisers several options of keyword targeting: broad matching, exact matching, phrase matching, and negative keywords.
The matching options define how close the search string entered by a user should be to a keyword selected by an advertiser.
If the advertiser has chosen [tennis ball] as their keyword (square brackets mean phrase match), their ad will be shown only if a user enters tennis ball into the search box.
If the advertiser has chosen “tennis ball” (quotes mean exact match), the ad show up if a user searches for red tennis ball or yellow tennis ball or simply tennis ball.
Finally, if the advertiser has chosen tennis ball with no brackets or quotes around it (for a broad match), the ad will show up even if a user enters wilson rackets.
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With negative keywords, advertisers can prevent their ad from showing up if a user enters this keyword. For example, a retailer would usually add -free, -replica to the keywords list to avoid targeting “free stuff” hunters.
One recent development with AdWords was the release of AdWords API (application program interface) that will allow third-party developers to create applications that will work directly with AdWords accounts – facilitating and automating many bid and ad management tasks.