AdWords is Google's flagship advertising product and main source of revenue ($16.4 billion in 2007). AdWords offers pay-per-click (PPC) advertising, and site-targeted advertising for both text and banner ads. The AdWords program includes local, national, and international distribution. Google's text advertisements are short, consisting of one title line and two content text lines. Image ads can be one of several different Interactive Advertising Bureau (IAB) standard sizes.
Google's AdWords division is based in Ann Arbor, Michigan, the company's third-largest facility behind its Mountain View, California, headquarters and New York City office.
Pay-Per-Click advertisements (PPC)
Advertisers specify the words that should trigger their ads and the maximum amount they are willing to pay per click. When a user searches Google's search engine on www.google.com or the relevant local/national google server (e.g. www.google.fr for France), ads (also known as creatives by Google) for relevant words are shown as "sponsored links" on the right side of the screen, and sometimes above the main search results.
The ordering of the paid listings depends on other advertisers' bids (PPC) and the "quality score" of all ads shown for a given search. The quality score is calculated by historical click-through rates, relevance of an advertiser's ad text and keywords, an advertiser's account history, and other relevance factors as determined by Google. The quality score is also used by Google to set the minimum bids for an advertiser's keywords. The minimum bid takes into consideration the quality of the landing page as well, which includes the relevancy and originality of content, navigability, and transparency into the nature of the business . Though Google has released a list of full guidelines for sites , the precise formula and meaning of relevance and its definition is in part secret to Google and the parameters used can change dynamically.
The auction mechanism that determines the order of the ads has been called a "generalized second price" auction. It is similar to the Vickrey auction, but is not equivalent to the Vickrey-Clarke-Groves (VCG) mechanism and hence truth telling is not an optimal strategy.
Placement targeted advertisements (formerly Site-Targeted Advertisements)
In 2003 Google introduced site-targeted advertising. Using the AdWords control panel, advertisers can enter keywords, domain names, topics, and demographic targeting preferences, and Google places the ads on what they see as relevant sites within their content network. If domain names are targeted, Google also provides a list of related sites for placement. Advertisers may bid on a cost per impression (CPM) or cost per click (CPC) basis for site targeting.
With placement targeting, it is possible for an ad to take up the entire ad block rather than have the ad block split into 1 to 4 ads, resulting in higher visibility for the advertiser.
The minimum CPM bid for placement targeted campaigns is 25 cents. There is no minimum CPC bid, however.
AdWords distribution
All AdWords ads are eligible to be shown on www.google.com. Advertisers also have the option of enabling their ads to show on Google's partner networks. The "search network" includes AOL search, Ask.com, and Netscape. Like www.google.com, these search engines show AdWords ads in response to user searches.
The "content network" shows AdWords ads on sites that are not search engines. These content network sites are those that use AdSense, the other side of the Google advertising model. AdSense is used by website owners who wish to make money by displaying ads on their websites. Click through rates on the content network are typically much lower than those on the search network and are therefore ignored when calculating an advertiser's quality score.
Google automatically determines the subject of pages and displays relevant ads based on the advertisers' keyword lists. AdSense publishers may select channels to help direct Google's ad placements on their pages, to better track performance of their ad units. There are many different types of ads you can run across Google's network, including text ads, image ads (banner ads), local business ads, mobile text ads, and in-page video ads.
Google AdWords' main competitors are Yahoo! Search Marketing and Microsoft adCenter.
AdWords Account Management
To help clients with the complexity of building and managing AdWords accounts search engine marketing agencies and consultants offer account management as a business service. This has allowed organizations without advertising expertise to reach a global, online audience. Google has started the Google Advertising Professionals program to certify agencies and consultants who have met specific qualifications and passed an exam. Google also provides account management software, called AdWords Editor.
Another useful feature is the My Client Centre available to Google Professionals (even if not yet passed the exam or budget parameters) whereby a Google professional has access and a dashboard summary of several accounts and can move between those accounts without logging in to each account.
Click-to-Call
Google Click-to-Call is a service provided by Google which allows users to call advertisers from Google search results pages. Users enter their phone number, Google calls them back and connects to the advertiser. Calling charges are paid by Google.
History
The AdWords product was launched in 2000. At first advertisers would pay a monthly amount, and Google would set up and manage their campaign. To accommodate small businesses and those who wanted to manage their own campaigns, Google soon introduced the AdWords self-service portal. Starting in 2005 Google provided a campaign management service called Jumpstart to assist advertisers in setting up their campaigns. However, this service is no longer available, so companies needing assistance must hire a third-party service provider.
In 2005, Google launched the Google Advertising Professional (GAP) Program to certify individuals and companies who have completed AdWords training and passed an exam. Due to the complexity of AdWords and the amount of money at stake, some advertisers hire a consultant to manage their campaigns.
Legal context
AdWords has generated lawsuits in the area of trademark law and click fraud. In 2006, Google settled a click fraud lawsuit for US$90 million.
Overture Services, Inc. sued Google for patent infringement in April 2002 in relation to the AdWords service. Following Yahoo!'s acquisition of Overture, the suit was settled in 2004 with Google agreeing to issue 2.7 million shares of common stock to Yahoo! in exchange for a perpetual license under the patent.
Technology
The AdWords system was initially implemented on top of the MySQL database engine. After the system had been launched, management decided to use a commercial database (Oracle) instead. As is typical of applications simultaneously written and tuned for one database, and ported to another, the system became much slower, so eventually it was returned to MySQL.
Policy and restrictions
As of April 2008 Google AdWords no longer allows for the display URL to deviate from that of the destination URL. Prior to its introduction, Google paid advertisements could feature different landing page URLs to that of what was being displayed on the search network. Google expounds that the policy change stems from both user and advertiser feedback. The concern prompting the restriction change is believed to be the premise on which users clicked advertisements. Users were in some cases, being misled and further targeted by AdWords advertisers.
Allowed keywords
Google has also come under fire for allowing AdWords advertisers to bid on trademarked keywords. In 2004, Google started allowing advertisers to bid on a wide variety of search terms in the US and Canada, including the trademarks of their competitors and in May 2008 expanded this policy to the UK and Ireland. Advertisers are restricted from using other companies' trademarks in their advertisement text if the trademark has been registered with Google's Advertising Legal Support team. Google does, however, require certification to run regulated keywords, such as those related to pharmaceuticals keywords, and some keywords, such as those related to gambling and hacking, are not allowed at all. These restrictions may vary by location. From June 2007, Google banned AdWords adverts for student essay writing services. While the move was welcomed by universities, there is no restriction on such sites appearing in the regular Google Search results.
