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AdWords is Google's flagship advertising product and main source of revenue. Google's total advertising revenues were USD$21 billion in 2008[1]. 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.

Sales and Support for Google's AdWords division is based in Ann Arbor, Michigan[2], the company's third-largest US facility behind its Mountain View, California, headquarters and New York City office.[3]Engineering for AdWords is based in Mountain View, California.


Pay-Per-Click advertisements (PPC)

Advertisers specify the words that should trigger their ads and the maximum amount they will pay per click. When a user searches Google's search engine on or the relevant local/national google server (e.g. for The United Kingdom), 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-for 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[1]. 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 [2]. Though Google has released a list of full guidelines for sites [3], 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 is a Generalized second-price auction. [4][5] This is claimed to have the property that the participants do not necessarily fare best when they truthfully reveal any private information asked for by the auction mechanism (in this case, the value of the keyword to them, in the form of a "truthful" bid).

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 (CPI) or cost per click (CPC) basis for site targeting [4].

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 cost-per-thousand impressions 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 Advertisers also have the option of enabling their ads to show on Google's partner networks. The "search network" includes AOL search,, and Netscape. Like, 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. It has been reported that using both AdSense and AdWords may cause a website to pay Google a commission when the website advertises itself.[6]

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.[7]. 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.

The Google Adwords Keyword Tool provides a list of related keywords for a specific website or keyword. [8]

Recently, numerous complaints have been filed with the San Jose BBB ( regarding treatment small businesses have received from Google Adwords customer service. As a result, the company now has a B- rating with the San Jose BBB.


Google Click-to-Call was 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. It was discontinued in 2007.[9]. For some time similar click-to-call functionality was available for results in Google Maps.


The original idea was invented by Bill Gross from Idealab who, in turn, borrowed it from yellow pages. Google wanted to buy the idea but the deal would not close.[citation needed] Google did not want to give up and launched AdWords in 2000.[10]. AdWords followed Bill Gross' model to a significant extent. In the course of legal action Google and Idealab settled the dispute.

At first AdWords advertisers would pay a monthly amount, and Google would then 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 [11] 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 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.

In 2008, Google launched the Google Online Marketing Challenge (, an in-class academic exercise for tertiary students. Over 8,000 students from 47 countries participated in the 2008 Challenge and over 10,000 students from 58 countries took part in 2009. The Challenge runs annually, roughly from January to June. Registration ( is at the instructor rather than student level.

In 2009, Google revised the AdWords interface, introduced Local Business Ads for Google Maps and Video Ads.

Legal context

AdWords has generated lawsuits in the area of trademark law (see Google, Inc. v. Am. Blind & Wallpaper Factory and Rescuecom Corp. v. Google, Inc.), and click fraud. In 2006, Google settled a click fraud lawsuit for US$90 million. [12]

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. [13]


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. The system became much slower, so eventually it was returned to MySQL. [14] The interface has also been revamped to offer better work flow with additional new features, such as, Spreadsheet Editing, Search Query Reports, and better Conversion Metrics[15]

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.[16]

Google has other restrictions, for example the advertising of a book by Aaron Greenspan called Authoritas: One Student's Harvard Admissions and the Founding of the Facebook Era, was restricted from advertising on AdWords because it contained the word Facebook in it. Google's rationale was that it was prohibited from advertising a book which used a trademarked name in its title. [17]

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[18] 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 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.[19] 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.[20]

See also


  1. "Financial Tables". Google Investor Relations. Retrieved 2008-01-31. 
  2. Inside Google's Michigan Office - Google - InformationWeek
  3. An Inside Look At Google's AdWords HQ > > Intelligent Enterprise: Better Insight for Business Decisions
  4. Benjamin Edelman, Michael Ostrovsky, and Michael Schwarz: "Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords". American Economic Review 97(1), 2007 pp 242-259.
  5. Hal R. Varian: "Position Auctions". International Journal of Industrial Organization, 2006, doi:10.1016/j.ijindorg.2006.10.002 .
  6. "BE CAREFUL when using both AdSense + AdWords by Google". 2009-02-19. 
  7. "Google Advertising Professionals". Retrieved 2007-05-30. 
  8. "Google Adwords Keyword Tool". 
  10. Google Milestones
  11. What is Jumpstart?
  12. Associated Press (2006-03-08). "Google settles advertising suit for $90 million". MSNBC. 
  13. Google, Yahoo bury the legal hatchet, Stefanie Olsen, CNET, August 9, 2004
  14. Xooglers: Let's get a real database
  15. Google's New Interface
  16. What do I need to know about the updated Display URL policy? - Google Help Centre
  17. Letzing, John (2008-07-12). "Facebook haunted by mild-mannered specter". Dow Jones Marketwatch.{DA2AE936-F19E-494B-B17B-CDBA3F2AF0BF}. Retrieved 2008-10-29. 
  18. Stefanie Olsen (2004-04-13). "Google plans trademark gambit". CNET. 
  19. "Google AdWords Help Center". Google. Retrieved 2007-12-08. 
  20. "Google bans essay writing adverts". BBC News. 2007-05-22. Retrieved 2008-05-23. 

External links


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