If you're just getting started with AdWords, then you likely don't know the history of it. How did it get to be so popular?
You see, the first successful pay-per-click search engine was called, "GoTo.com." It was a novel concept that instead of free rankings, you charged for them. Moreover, instead of paying for an ad ahead of time, you only pay for results (the amount of clicks you received).
It was relatively low-risk for advertisers.
It caught on and eventually changed over to Overture.com where it become the dominant player in PPC. Hundreds of other pay-per-click search engines arose, but none really rivaled Overture (though there were a few decent sized ones).
At this time, pay-per-click was very simple. Whoever paid the most, got the top rankings.
This then led Google to develop AdWords. However, they made 4 big changes from Overture's model:
1. No longer did the highest bidder always win, but click-thru-rates or how often somebody clicked on ad was a major consideration. Thus, the advertiser now had an incentive to optimize their listings and make them relevant to searchers.
2. Google removed the bureaucracy and let ads show on Google.com before they were reviewed. Only those on partner sites would need to be reviewed. Overture's editors would take 3-5 days before your ads could start showing. Then, they would often reject a lot of the keywords you wanted to bid on. Needless to say, they weren't always accurate and there isn't always a pressing desire to optimize when you don't get immediate gratification.
3. They lowered the upfront cost barrier to only $5. Overture was not expensive either, but Google could now make the claim, "Get started for only $5 and have your ads showing in 5 minutes." This is a compelling argument to advertisers to get them to try it.
4. They showed small text ads alongside the organic search results. They realized that paid ads offer a lot of value to searchers and they compliment the free listings. For example, if you're looking to buy, you may want more information from non-advertisers and then buy from a reputable advertiser.
Today, Google has continued to innovate. They have a larger emphasis on not just the quality of ads, but landing pages as well. Overture eventually got bought-out by Yahoo, which along with MSN, have slowly swiped ideas from Google.
Google now makes most of its revenue from its AdWords program. They also went on to develop Google AdSense, which was a major step forward in how the web is monetized.
Publishers now had access to a huge network of advertisers they could get showing on their sites even if they're just getting started and have 100 visitors a month. In other words, publishers now had a way to make money quickly from giving away information for free.
A good example of its impact is to take a look at YouTube.com or MySpace.com. They both help make some revenue (though it might not be enough) through showing Google ads. They don't have to recruit targeted advertisers for all of the pages.
Many sites that would otherwise have to charge money are now able to operate free.
Virtually every market now has loads of sites that show Google ads (which you advertise on via the content network inside your AdWords account).
With all of this said, in the future, it will be interesting to monitor the following:
- How will Google rank ads? What factors will it consider when deciding how much you pay and where you rank?
- Will Yahoo or MSN get their act together and be real competitor? Currently, Microsoft's new Bing search engine seems to be performing well.
- What other new mediums will be next to show ads? Mobile phone ads seem to have the most potential at this time.
By looking at the history of PPC, it helps shed light on where it is likely to go and where you need to focus your attention as a result.