When using a search engine, you probably noticed the column to the right and usually a box at the top of the results page with web sites listed along with a brief description. You may also have noticed that these 2 areas have a subtle heading called "Sponsored Link". The companies listed there have bid a certain amount to appear in these locations when someone searches for a particular set of "keywords", the same keywords that you used to get those results. These keywords are called AdWords.
How it works is that when someone clicks on one of those links instead of the organic links that show up below them, the owner of that site pays Google, or Yahoo, a fixed amount. Actually, the amount is based on a bid the company agreed to pay for each of these clicks. This is called "Pay-Per-Click" advertising, and in Search Engine advertising lingo it's just AdWords.
You only pay Google or Yahoo when your link is clicked. The amount you pay depends on how much you want to spend when someone clicks your ad. Obviously, you want to appear in the first page or two of your keywords. Few people go much deeper in search engine results than the first 3 - 4 pages. That means if there are a lot of other businesses using AdWords that also want to target the same keywords, there will be an increased demand to appear in those first few pages. This demand is sorted out by one or two company's willing to pay more, or bid, on the keyword being searched, than anyone else.
An example: Lawncare Company A has a web site and wants to drive more traffic to their web site than what is being generated by organic searches. They decide that next spring when most new lawn care sales are being generated that they will agree with Google to pay them $0.05 for each click for the AdWord term "lawncare". This is a very generic term, and not recommended, but it helps explain the process.
Now Lawncare Company B feels the same way as Lawncare Company A, with one exception: they are willing to spend $0.10 per click for the same term. Google would then display Lawncare Company B's listing above Lawncare Company A because they are willing to spend more on a click. Lawn Care Company B would be charged $0.10 each time someone clicked on their ad.
Besides the obvious keywords that would use, you can also limit your ad to only be displayed on certain days of the week and certain times of the day. You can also limit your ad to be displayed on computers with certain IP addresses. For example, there's no need to display your lawncare ad to a computer accessing the internet from India.
The ideal way of monitoring your AdWords campaign is using Google Analytics. This is a free service that closely monitors all activity on your web site, and integrates with your AdWords campaign. By creating a landing page and submission form that is unique and only accessible through the AdWords, you have an easily observable reference point to determine the productivity of your campaign.
This integration of your site with Google Analytics and the optimized landing pages give you a clear reference point to determine your ROI for the AdWords. If you're an OHCPi web client, we can install the Google Analytics source code on your web site as well as create a pair of customized pages (landing page and submission form) that you can then use to track your results. Setup charges are on the left column.