This first article on AdWords is an overview of both search advertising in theory and AdWords in practice. I sketch the main points of Google’s service here, and get into the details in later articles. Search advertising brings new marketing propositions to the table. This is not to say that search advertising is brand new, but it is reaching a tipping point (to borrow author Malcolm Gladwell’s phrase). Nobody knows what we are tipping into. But there’s no question that search advertising, with its revolutionary pay-for-performance model, precise targeting, and client control, is rocking the advertising world. This article argues the revolutionary benefits of search advertising, and then proceeds to an overview of the preeminent search advertising venue: the Google AdWords program. Be sure to reference the glossary at the back of the article, which includes all important search advertising and AdWords terms you’re likely to encounter. Old Advertising in an Old Media Let’s watch TV. I like Late Show with David Letterman, 24, and even though I’m so far beyond my teen years I can barely remember them Smallville. The two prime-time shows are presented in six acts broken up by commercials.

Letterman usually has six or seven segments separated by increasingly longer breaks as the hour proceeds. Commercials take up nearly a third of the shows’ time slots. Ads run the gamut: cars, beer, movies, insurance, and medications for aging Boomers, computers, drugstores. They’re entertaining or banal; long or short; punchy or pedestrian. And they’re almost all irrelevant to my desires and needs. I’m not the only one complaining. Most TV ads are irrelevant to almost everyone who sees them. Indeed, the irrelevancy is part of the plan in blanket advertising. Blanket ads are shown indiscriminately to an entire audience, with the idea that for every 20 (or 30, or 100) people who see the ad, 1 person finds it relevant. Advertisers pay to reach that 1 person multiplied by huge audience groups, and simply don’t care about the rest. This sort of TV promotion was started in an earlier era, when both the medium and society were more consolidated. In the 1950s and 1960s, television for most people offered between three and six channels.

Huge audiences watched popular shows. (If you don’t remember watching The Ed Sullivan Show every Sunday night, you’re younger than I am.) Furthermore, nothing like today’s product diversity existed. So, in that simpler time, more people gathered in bigger groups with more shared desires. Blanket advertising was a reasonably cost-efficient way to get a message out to a great number of people who would find it relevant. Blanket ads still work, but finer targeting is now necessary. In the past, only the most rudimentary sort of targeting was put into play matching a product to the type of audience likely to be watching a program. Now advertisers match a product to age and lifestyle categories supplied by audience measurement services. With the advent of TiVo and other personal video recorders (PVRs), these services are becoming quite specific about the viewing and surfing habits of the TV audience. Nevertheless, blanket advertising still works according to an old-media principle: Show the ad to everyone in the target group, and hope it’s relevant to at least a few. How often are TV ads relevant and interesting to you? Not often, I’m guessing, even if you match the demographic targeted by a show’s sponsors. The irrelevancy of ads is why ad-skipping technology built into TiVo, ReplayTV, and the other PVRs has become so popular. In fact, the TV industry is alarmed about the ease with which the audience can time-shift its viewing and avoid ads entirely. If the ads were precisely targeted to each of us, individually, we probably wouldn’t want to skip them. At least, not as much. Old Advertising in a New Medium Relevance is the quality that makes an advertisement effective.

This golden rule is as true online as it is offline. We live in an ad-saturated age, but our problem isn’t too many ads it’s too many irrelevant ads. If ads could be targeted more specifically to what individuals want, the total number of sponsored messages might not be reduced. But irrelevant advertising systems that blanket us from billboards, airwaves, and all other media would erode as advertisers flocked to promotional systems that didn’t waste their money. This is where the Internet comes in. But the Net hasn’t completely saved us from irrelevant ads. The online equivalent of TV’s blanket advertising started with static banner ads and evolved to video pop-ups. The latter format obscures the content of Web pages to play commercials that, in the glitziest examples, look just like TV ads. These distractions are even pushier than a TV commercial because their style of interruption is more invasive. Whereas television schedules its commercials in planned breaks, Web pop-ups fly right into your face while you’re trying to read a page.

They’re more intrusive than television, radio, or magazine advertising. Pushy Internet ads are more galling than pushy TV ads because the Internet is inherently a medium in which content is pulled, not pushed. Television is more passive; the audience settles on its couches and lets content be pushed at it. Changing to another station is traditionally the limit of a viewer’s control, or pull, over TV. (PVRs give the viewer more control, but that’s when ads are skipped entirely.) On the Internet, content appears on the screen when the viewer pulls it to the screen, usually by clicking a link or bookmark. Some slightly pushy experiences can occur online, as when somebody instant-messages you and the IM window pops open on your screen. Even then, though, the pushy IM can’t happen unless you give the messaging person your IM coordinates a type of pull. With e-mail, letters are pushed into your mailbox, but they don’t fully appear on your screen until you click (pull) them. Pushy advertising in a pull medium is bound to result in conflict. Sure enough, banners, pop-ups, and spam are all extremely ineffective. They result in such built-up consumer resentment and miniscule response rates that they survive only because of economies of scale. Because they can be distributed in massive numbers at low cost, even their dismal effectiveness pays out.

Generally, the least effective ad types (such as e-mail spam) are the cheapest, making them the most pervasive and the most persistent. Spam is the Internet’s most aggressive type of blanket advertising, with the least degree of relevance. In principle, though, spam is no less pushy, broadly targeted, irrelevant, and inappropriate to the medium than a video pop-up at a respected Web site. New Advertising in a New Medium Now, finally, the Internet is poised to save us from irrelevant advertising. Search advertising offers better response rates and better ways to track whether ads are reaching the right people. Search advertising is revolutionary in that it discards blanket advertising in favor of precise targets, controlled costs, and meeting a pull medium on its own terms. All Internet advertising, even the blanket type, contains an advantage over advertising in most other media: It invites the viewer to take action immediately. Clicking an ad takes consumers to the next step in their relationship with the advertiser. At that next step, some type of conversion is possible a sale, a registration, a bookmarked site, or some other behavior that “captures” the customer in a sense. Besides this dynamic quality of online ads, search advertising makes four distinct and earth-shaking improvements on blanket advertising:

-  Search advertising is positioned on results pages of search engines, where the customer is looking for the advertiser. Well, perhaps the customer is not literally looking for you, but he or she is looking for something. The searcher is in a pulling mood in the mood to consume information, products, and services. If the advertiser provides relevancy to that person’s search, the heavenly marketing match is made. And the chance of a response is much greater than when a blanket ad wrenches a viewer out of a passive state.

-  Search ads are aligned with keywords and appear on results pages for those keywords. So, as long as the advertiser chooses keywords appropriate to the message, and the searcher uses keywords appropriate to the search goal, relevancy is guaranteed. Compared to the built-in irrelevancy of blanket advertising, this degree of match-up between advertiser and consumer is groundbreaking.

-  Search advertisers pay only for responses. The advertiser pays each time a searcher clicks the ad. When that treasured click happens, the advertiser receives a qualified lead somebody who searched for some combination of keywords and chose to click an advertisement that promised relevancy as good (or better) than nonsponsored search results. Contrast this method with the old-media system in which the advertiser pays for sheer exposure. In the online universe, exposure means paying for impressions the number of times the ad is displayed, even if nobody clicks it.

-  Search advertising offers detailed, multifaceted, hands-on control of the advertising campaign. Google is particularly strong in this department. Advertisers can micromanage their accounts, measuring performance and enhancing their efficiency on a minute-by-minute basis. I hasten to add that such obsessive management is not necessary in search advertising. But the ability to control the campaign as it proceeds represents one of the great advantages over broadcast and traditional print advertising, in which you purchase a campaign and either it works or it doesn’t. Tweaking, adjusting, and resculpting the campaign in midstream to make it work is part of the search advertising system. Let me be clear. Google didn’t invent search advertising. Google didn’t even invent pay-per-click (PPC) advertising, which has supplanted pay-per-impression sponsored links on Google’s pages. But Google has refined the game considerably, improving the basic parameters of search advertising. Google is involved in PPC competition with other search engines, and to some extent they leapfrog, one improvement after another. Generally, though, Google has taken the lead in innovation. In particular, the following three features are highly valued by Google advertisers:

-  Minimum payments. As I describe later, search advertisers bid on the value of the keywords associated with their ads. Those bids determine the ad’s position on the results page and the top amount the advertiser pays when searchers click the ad. However, Google uses a complex formula to determine the lowest amount the advertiser must pay, per click, to maintain position on the page and that is the amount Google charges. All this is clarified later. The point here is that Google streamlines expenses by charging the least possible amount for advertisers to compete effectively for position on the page.

-  Success breeds success. Unlike other PPC systems, Google factors an ad’s success into the cost of keeping that ad in a high position on the

page. Position is partly determined by bid amount, but a very successful ad with a low bid on a keyword can place higher than an unsuccessful ad with a higher bid on that keyword. Success is measured by clickthrough rate, or CTR. Here again, relevancy is the name of the game. Google cares so much about providing its searchers with relevancy on the search results page (in results listings and advertisements) that it rewards relevant ads with discount pricing for high placement.

-  Conversion tracking. Getting a searcher to click your ad is the first step; making a sale is the next step. The sale can be whatever the advertiser wants from the customer; the desired action could be a simple site registration or signing up for a free newsletter. Whatever you want the customer to do on your site after clicking through your ad, Google helps track your success, or the conversion rate. All this and more is bundled into the Google AdWords keyword advertising program. If you’ve used Google, you’ve seen AdWords in action. What You Need to Get Started with AdWords The two factors that have kept advertising in the realm of relatively large companies for years are:

-  High cost

-  High commitment

These two factors characterize blanket advertising, in which exposure of arguable value is purchased in large, expensive, irrevocable blocks. In refreshing contrast, Google AdWords features -  Low cost -  No commitment Anybody can advertise in the AdWords program. The traditional barriers to advertising on a global scale are demolished. It is possible to spend a lot of money advertising on Google, but the point is not cheap advertising but cost-effective advertising. The absence of commitment, in terms of a campaign’s duration and expense, enables advertisers to cut losses instantly and work to improve their return on investment (ROI). You need only two things to start an AdWords campaign:

-  Five dollars

-  A landing page

A landing page is the clickthrough destination, the URL underlying your ad’s link. Most advertisers spend quite a bit more than five dollars, but that nominal amount is all Google requires to activate an account. Likewise, most advertisers own considerably more Web property than a single landing page. However, as I write this article, I’m managing a small AdWords campaign for a non-profit institution promoting a single event publicized with a single Web page. This small-time approach isn’t unusual, even for thriving Internet businesses that sell a single product from a single page or affiliate businesses whose ads link customers directly to somebody else’s order-taking page. In that latter case, the advertiser might own merely the right to link to another company’s landing page. Democracy and small-business friendliness are important, attractive attributes of search advertising.

The smallest of small-time players can join in, battling it out for screen space with major media corporations. Survival and success depend on smart targeting, good research, and tenacious adaptation more than on the brute force of spending. True, deep pockets help when bidding on expensive keywords, but as I discuss in the following articles, avoiding keyword traps is part of nimble marketing in Google.