Google Advertising How Google determines ranks and rates of its sponsored links

Plain English article detailing main features of Google Advertising..

Behind the Curtain / How Google determines ranks and rates of its sponsored links: "Scott Kessler, a Standard & Poor's analyst, worries about what he calls Google's ABCs of risk: the absence of other means for making money; building competition; and click fraud, a practice in which competitors or scammers click on ads repeatedly, potentially costing Google and its advertisers thousands of dollars.
'It's one of the great questions people have to ponder with Google,' Kessler said about click fraud.
But before laying odds on Google's future, it helps to have a better understanding of the firm's deceptively simple business model. So, how does Google make all that money?

Google's advertising business appears simple. It takes just a few minutes and $5 to start posting sponsored links.

The tricky part comes as businesses battle for the top position on the first page of Google's results. Naturally, that's the sweet spot: An ad at the top of the page receives roughly double the clicks of others, said Michael Schwarz, a researcher at UC Berkeley.

But there is no way to guarantee that crucial spot. Where an advertisement appears depends on a combination of how much a business is willing to pay, and how much the ad has to do with the search.

That means that no matter how much an advertiser is willing to pay, the ad will not get top billing if the user is looking for something completely different...

In January, U.S. consumers used Google for 2.8 billion searches, or nearly 50 percent all of online queries, according to Nielsen/NetRatings. That helped produce 41.1 billion sponsored links in January on Google and its partner sites. And the experience with click fraud hasn't stopped E-magine Networks and other businesses from continuing to use Google.

"I'm not trying to be angry with Google. I want to work with Google," said Dupell of E-magine Networks.

"It is not an evil corporation," he continued. "It may be a place where fraud does occur, but Google does refund the money back if it can be proven. ... They have made us a fortune and they've made our clients a fortune and they continue to every day."


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How to do it
Placing an advertisement on Google can cost as little as $5 and take just a few minutes.

1. Draw up a three-line advertisement, no more than 100 characters total.

2. Enter the keywords that will activate your sponsored link, such as "cheap airfare" for an ad about discount travel.

3. Bid in an auction for those keywords, determining how much you're willing to pay. The minimum bid is 1 cent per click. The maximum is $100 per click. You can't spend more than $250,000 a day.

4. Give Google your billing information and wait for your ad to appear."