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The Power of Google Adwords

The power of advertisements becomes clear once again, with a study by UK watchdog Ofcom identifying that most young people were unable to tell the difference between ads and real websites. [1] Ofcom is an independent regulator and competition authority for the UK communications industries and it researches online behavior for the protection of British citizens. Google employs a metric for gaining advertisement revenue as discussed in class, and this study highlights why the spots are worth so much. Adwords, Google’s competitive advertisement marketplace, offers auctions for keywords and often requires a pay per click. [2] Large corporations can spend over $50 million annually on their Google ad-campaign, averaging $1-2 per click. Interestingly enough, the top few ad revenue spots go to the keywords of insurance, loans and mortages.
Unlike what we discussed in class, however, Google adds a specific notion of a quality score to the equation on who actually has the ‘highest’ bid for the ad space. How relevant a company’s ad is to the user and the keyword typed in is used to determine this quality score. In essence Google’s ad bidding is still reliant on a second-price bidding metric, with an extra factor of your quality score factored in. This levels the playing field in essence, with not only those with the most money to spend on advertisement campaigns able to secure ad spots.


There are a few additional interesting things that Google offers for its advertisements. This includes the ability to target specific locations and areas for the advertisement reach as well as targeting specific devises like tablets or smartphones. All in all, this advertisement power has enabled Google to bring in over $66 billion last year, with over 90% of that coming from advertisements.




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November 2015