Search and Advertising are the two most important product segments at Google. Search is the basis of the company and the reason for most users to come to Google. Advertising is the means through which those users are monetized. Though they were not the first, Google successfully developed and implemented text advertising in such a way that it was easily accessible to small advertisers. AdWords, the advertising system they developed is simple and hence consequently very powerful. Based on an auction model, you can bid as low as 5 cents for a keyword and run a simple text ad that will be displayed when a user searches for something similar to your keyword.
This enabled advertisers of all sizes to enter the advertising market where before they had a large barrier to entry. Most small companies do not have the large budgets needed to hire ad agencies and creative studios to develop advertising. Yet with adwords you can now run a successful campaign with just a couple of people. Text ads also provide a more efficient mechanism for advertising since the advertisers are matched very closely to the consumers, using the keywords the consumer typed. And finally, adwords provides the advertisers with a fine level of control and access to analytics to give them a never before seen level of understanding of how their consumers are interacting with their advertising.
So here is the secret in a nutshell: Allow a large number of advertisers (of all sizes) access to a large number of consumers, make the ads highly relevant and give the advertisers full control.
Using this strategy Google has come to dominate the text ad market and is bringing this same level of access, relevance and control to the online display ad market (with the acquisition of doubleclick) as well as the print, radio and TV markets. Hence I predict that Google will, within the next 5 years, dominate all forms of advertising and I look forward to oncoming advertising revolution!
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