A business of any size, even an individual just starting out, may purchase AdWords ads. There is no exclusivity based on type of business, amount of revenue, promotional budget, or any other criterion. You do need a Web page. You do not need to be selling something, though there is probably a low limit on the amount of money anybody would spend on advertising a hobby site.

Beginning an AdWords campaign consists of four main steps:

1. Sign up for an AdWords account.
2. Write an ad.
3. Choose keywords with which your ad will be associated.
4. Price your ad and decide on an overall payment budget.

You may create the account and your ads before committing to the campaign; your ads can be activated anytime after creating them.

AdWords ads are nothing more than blurbs. With no graphics and minimal text, they fit concisely along the right side of search results pages. Sponsorships are more expensive, and this section deals only with AdWords.

Nothing succeeds like success, the old saying goes — and it holds true for ad placement on Google’s search results page. The cost you assign per clickthrough is a big part of the story, but it’s not the only part. Google rewards successful ads by placing them higher on the page and reducing their clickthrough costs. Success is measured by clickthrough rate — that is, the number of clickthroughs an ad attracts compared to its display rate. This formula is shown as an Interest Bar (looking very much like the PageRank bar for Web sites) at the bottom of each ad.

Google rewards high clickthrough rates by lowering the effective CPC price assigned to that ad. This means the more popular ad might get top placement even when competing with an advertiser who assigned a higher CPC price. Google does not divulge the exact formula that determines ad placement (just as Google remains silent about its PageRank formula for Web sites). Generally, though, ad placement depends on a combination of CPC price (your bid) and clickthrough rate (your ad’s success).

This formula has a flip side. Just as Google rewards success with higher placement, it punishes failure with reduced distribution. That means that if an ad doesn’t generate a certain clickthrough level (usually one percent for new advertisers), Google reduces the rate at which it’s displayed. This measure might seem harsh, but Google is primarily concerned with the end-user experience on behalf of people using the search engine, and Google wants useful, magnetic ads appearing in the right column of its results pages. If the Interest Bar gets too small, Google doesn’t want the ad on its pages.

Google sends a notice to the control center of any advertiser whose ad has been knocked into reduced circulation. You can restore full delivery with a button click, and Google provides tools and tips for improving the clickthrough rate. If Google again pushes aside your ad, and you restore full delivery a third time, Google charges a $5.00 reactivation fee.

The essential item that you create in an AdWords campaign is the ad group. An ad group contains one ad, its keywords, and its underlying cost structure. (In truth, an ad group may contain more than one ad, but just one set of keywords targeted by the ads. In the interest of keeping things simple, this section considers an ad group as containing a single ad.)

Following is a breakdown of every element in an ad group:

• Headline: Each ad starts with a headline that links to the target page.

• Description lines: Two very short lines. That’s all you get in the way of descriptive content. Concise writing is crucial.

• Destination URL: Each ad spells out the target page address, which is the same as the Headline link address.

• Keywords: Every ad is associated with search keywords that cause its appearance on a results page. Keyword phrases may be used. You can change the keywords at any time.

• Cost-per-click (CPC): You decide how much the ad is worth to you by deciding the price you will pay whenever somebody clicks it. Google enforces minimums for some keywords. (The total CPC price range for all ads is $.05 to $50.00.) Your ad competes with other ads associated with the same keyword(s), and advertisers willing to pay more get better (higher) positioning on the page.

Google’s international sensibility is reflected in AdWords; you may specify a language and a country for your ads. Google determines, more or less successfully, the country from which each user’s computer is logged in. The language requirement is more certain: Google shows your ad to users whose Preferences language setting matches your chosen language.

Here’s how it all works. You create an ad (or ads). You choose one or more keywords (or phrases) to associate with each ad. You decide how much to pay for visitors clicking through each ad. You establish a limit on your daily expenditure on Google advertising. Then, if and when you activate your ad, Google automatically places it on search results pages when people search for keywords associated with your ad. Your ad’s visibility (placement on the results page) depends on your CPC price compared to that of other advertisers sharing your keyword(s). Most likely, placement varies over time as advertisers come and go, or as they adjust their CPC prices.

You manage your Google advertising activity through a personal control center attached to your account. There, you activate and deactivate individual ads, change keywords, and adjust cost settings.