Google has yet again created a great innovation in internet advertising. With Google AdWords, people can now easily and quickly run advertisements for their business over the internet. Ads are displayed along with search results when people searches for a keyword using Google as search engine. The best thing about this is you are ensured that people seeing your ads are already interested about business.
Ads can also be in various forms such as text, images or videos. A great benefit for business suing Google AdWords is that they are only required to pay when people actually click their ads. This is referred to as “pay-per-click-advertising.”
Most of us however, have no idea yet how Google AdWords came to be. You might even be surprised to know that Google didn’t invent search or auction-based pay-per-click advertising. Google’s innovation however, is perfecting it.
This all started in 1999 when Google began experimenting by selling ads on CMP basis which was the popular ad model of that time. Google wanted to sell only simple and unobtrusive text ads that time instead of using banner ads which were dominant during those years. They also wanted to place these ads separately from search results unlike most search engines. The only problem is that there was still no pay-per-click or bidding at that time yet so text ads were sold by a sales rep on a CPM basis, and this didn’t make enough money for Google.
From this lack of advertising success Google had planned to turn over its inventory to the largest ad banner business at that time; but with an unfortunate event the online ad banner market crashed in spring of 2000.
Google then introduced a self-serve model for buying text ads. They got this idea from another advertisement website but didn’t adopt their pay-per-click model right then.
In October 2000, Google launched AdWords; this first version of AdWords still sold ads on a CPM basis and was successful. Then in February of 2002, Google introduced a new version of AdWords using pay-per-click auction model. This allowed advertisers to bid on how much they will pay per click. The only difference is that it was a lot better. While the pay-per-click auction model at that time allowed advertisers to buy their way to the top of the listings so that highest bidders get the most exposure, Google used their own “click through” rate, in such way that if an ad with a lower bid per click got clicked more often, it would rank higher.
Through Google’s “click through” rate, a lower bid ad with more clicks generated more revenue even than a higher bid ad with fewer clicks. Truly a great innovation from Google.