Without AdWords there would be no AdSense and so an understanding of AdWords is a pre-requisite to understanding AdSense.

AdWords are those prim, dull, text-only ads that sometimes appear on Google search results pages.

They show up when certain words or phrases (keywords in the AdWords jargon guide) are entered into the search box and it is up to the advertiser which keywords have to be entered for their ad to show.  What this process achieves is the placement of ads in front of people with known interests.  It also enables niche advertisers to target ads with incredible precision by careful selection of the trigger keywords.

The AdWords business model is to charge the advertiser each time someone clicks on their ad but there is a lot more to the process than that.  The price paid depends on a complex real-time auction process AND on the click thru rate achieved by the ad.  Advertisers bid for trigger keywords and if they bid the highest they appear first on the page. On a typical Google page, a maximum of 8 AdWords ads will appear at a time and if there are fewer than 8, the bottom slot is available for an incredibly tiny 5 cents!

Google places strict editorial and physical limits on the wording, or copy, of an AdWords ad.  The top line or header is limited to just 25 characters.  The next two lines, or body, are limited to 35 characters each as is the viewable website address that appears on the bottom line.  Advertisers are not allowed to use phrases such as "Click me" on their AdWords ads and nor are they allowed to use superlatives without third party endorsement so you can't use "Best widgets in the world" in your ad.

Behind the AdWords ad is a URL that doesn't have to be the same as the viewable website address although editorial guidelines demand that it is related.  This URL is the address of the web page to which users are taken if they click on the ad (and it doesn't have to be the home page of the site).

As part of the AdWords campaign set up process, advertisers are asked whether they want their AdWords ads syndicated to Google's partners or not.  If they agree to have their ads syndicated they are then published on third party sites as part of Google's AdSense program.

Google has made the process of setting up an AdWords account quite easy and provides the advertiser with a vast array of controls and reporting tools so that he can see which ads perform well.  Towards the end of 2003 Google also released further tracking systems that enable advertisers to see not only which ads and keywords perform well, but also which ads and keywords result in the desired outcome for the advertiser.  So if you use AdWords to get people to sign up to an ezine subscription, you can place Google code on your website's registration acknowledgement page and see which keywords and ads lead to the greatest sign ups.  They will not necessarily be the same ads and keywords that lead to the greatest click thrus.

Google reports response rates etc. to the advertiser in slightly delayed real time - usually around 3 hours and this enables the advertiser to fine tune campaigns super fast.

AdSense = AdWords syndication

AdWords ads that are syndicated out are also only displayed on context relevant web pages provided that option is selected by the advertiser when he sets up his trigger keywords but this time the process is slightly different.  For an AdSense / AdWords ad to be shown, Google's search engine must have determined in advance that the content of the site is strongly linked to the keywords that the advertiser set up.  The process is extremely efficient and it is rare that AdSense ads display on irrelevant sites.

Google's editorial staff also check all AdWords ads that are syndicated as an insurance policy to protect AdSense partners and so any advertiser making frequent changes to his AdWords ads is going to find his ads disappearing from third party sites for a while until they have undergone editorial review.

From the AdWords advertiser's perspective, Content Targeted Advertising, which is Google's phrase for sub-contracting out the display of its AdWords ads, will not always lead to the same Click Thru rates that straight Google AdWords will but for those advertisers seeking maximum exposure Content Targeting Advertising delivers good value.

Key facts about AdWords

• The advertiser controls the wording on his AdWords ad within strict guidelines set by Google.

• When a customer clicks on an ad they go to a web page. The advertiser chooses which web page this is and usually it will be on their own website unless they are using AdWords or AdSense to win customers for an affiliate program.

• Advertisers don't pay anything for just getting their ad aired.

• There are a maximum of 8 AdWords to a page on Google and 4 to a page on AdSense pages.  The position of an ad is determined by a complex real-time bidding process

• Apart from the account opening fee ($5) there is no on-going charge for running an AdWords account

• Advertisers can set up their ads so that they only pay 5c for a click-thru and these ads are unlikely to generate much revenue for AdSense participants.

• Advertisers can put a limit on how much they spend with Google each day and there is no minimum charge.

• Google does not allow certain words and phrases in ads. For example, advertisers may not use words like "Best" unless they provide independently verifiable proof that this is the case.

• Google gives advertisers tons of information about how well their AdWords work. In the space of just a few hours they can begin to see which Keywords and AdWords ads produce the greatest number of visits to their website.

• AdWords campaigns can be switched on or off in just a few seconds.

If you are in the UK and are considering AdWords as part of your marketing plan, get in touch with Commercial Reality, a sister site to FactsAboutAdSense.com