How Google Ads was born

Above and below organic search results we can see ads.
Pay-per-click (PPC) advertising usually accompany search results.

Advertisers compete for their ads to be shown to serchers, when they are trying to find something.

In case of a search campaign, advertisers compete for for keywords.

In other words, ads are shown based on what someone is being seeking. That is, keywords trigger the display of ads.

Before PPC, almost all ads were shown according to cost per thousand impressions (CPM) basis. That is: advertisers just bough how many times their banner would be shown to users.

According to PPC model, advertisers pay only for the traffic they receive.

Before PPC model was introduced, advertisers had to invest thouthands of dollars per month. Maybe it would have changed anyway, but when PPC came into being, minimum investment in advertising on the internet became became significantly lower. One of the reasons why this happened is that it was allowed to manage ads yourself. In bygone days you had to apply to an advertising company. Now investment in ads can be as small as $1 per day or even lower.

Usually CPM programme looked like this:

  1. Talk to a sales person.
  2. Sign a contract with a pretty high minimum spend stipulated.

Google launched their first self-serve advertising programme in 2000.

In PPC model the principle of competicion is the auction. To put it simply, advertisers bid for keywords, they announce the price they are ready to pay for a click. Depending on the results of the auction, the winner occupies the highest position among places for advertising.

The more clicks you win at the auction, the more traffic you get to your website.

The inventor of this technique was called GoTo.com, later renamed Overture Services. In the year 2003 Yahoo acquired Outventure.

This is the patent: https://patents.google.com/patent/US6269361B1/en

For your information: Microsoft and Yahoo formed the Search Alliance in 2003.

There was a litigation initially between Overture and Google, then between Yahoo and Google over the infringement of the patent.
Finally Google settled with Yahoo and bought a license to the patent.

By the way, in bygone days advertising programme by Google was called Google AdWords. On 27 June 2018 it was renamed Google Ads.

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