Google Adwords has quickly become the fastest way to make and lose money on the internet. If you have a great product and a well run campaign, you can be making money within an hour. However, a shockingly high percentage of advertisers lose money on Adwords or see the majority of their profits ending up in Google's pockets rather than their own. We're not Adwords experts, but we have picked up some good techniques over the years. If you're investing significant amounts of money into Adwords, or are considering doing so, then we recommend that you check out one of the real experts listed below.

First, an overview. Google Adwords are the advertisements that you see on the right hand column of the page when you do a search on Google. More and more, these ads are displaying on non-Google pages as well, including this one (look to the top right). Advertisers pay every time a visitor clicks on one of their ads. As Google ads display about 10 minutes after being set up, they are an extremely fast and efficient way of promoting a product.

When creating a Google Ad, you get four lines of text that will appear to the customer. They are, a title line of up to 25 characters, two text lines of up to 35 characters each, and a display URL up to 35 characters. The actual URL can be much longer than this and will not be displayed. Advertisers specify the maximum amount that they are willing to pay for a click through, and can have their ad display for as little as $0.05 per click.

Now down to the nitty gritty. There are two primary pay per click engines on the internet, Google and Yahoo Search Marketing (formerly Overture). Yahoo Search Marketing provides the ads for Yahoo and MSN among others. Google provides ads for Google and AOL, plus thousands of other sites. Thus by advertising in both Google and Overture, you cover the top four search engines and a huge percentage of the internet. Achieving a high rank in Yahoo Search Marketing is simple, the site that pays the most per click gets ranked the highest. Google however requires a bit more effort.

Just as Google tries to make their free search results as relevant as possible, they use similar algorythms to rank their paid advertisements. Therefore, they don't just go by the amount of money an adveriser bids for their ad, they multiply that amount by the click through rate of the ad and come up with an adjusted number. The click through rate is the number of impressions divided by the number of clicks that an ad gets. Therefore, if Google displays an add 1000 times and 15 people click on it, it has a click through rate of 1.5%.

The key to doing well on Google is achieving a high click through rate. A person bidding $1.00 per click that has a click through rate of 1% will have their ad listed below that of someone bidding $0.53 that has a click through rate of 2%. The better you write your ad, the more relevant it is to the search term, the higher your click through rate will be, which means that you will get better placement, more click throughs, and spend less money. Simple right? Understanding all of that is the easy part, the harder part is doing it.

OK, you came here for some pointers, here they are:

• Don't try to be #1, you'll spend far more per customer than the person a few spots below you. Start off trying to be on the bottom of the first page, around #7. If after time you find that you're making a killing and don't mind paying twice as much per customer, then think about moving up.
• Make your ads relevant to the searches. If you have one ad for your website and you're advertising it for 100 different keywords, your click through rate will suffer. It's far more labor intensive, but also far better, to make more ads so that each one is relevant to the keywords you're listing it for. The more relevant to the keyword, the higher the click through rate, the lower your cost.
• Use the search term in the ad. Do a search on Google. You'll see that the search term you used is highlighted every place it shows up on the page. If you put the search term into the ad, your ad will be automatically highlighted and result in better click throughs.
• Try different ads. It is a good idea to experiment with different ads and see if your click through rate goes up or down. Google will let you try multiple ads for the same thing at the same time. Keep searching for the winning combination.
• Track your sales. Google has a conversion counter that you can install on your site. It will tell you how much you've spent on adwords for each sale you make. Make sure you're ads are making money.
• Have relevant landing pages. If all of your ads go to your mainpage rather than the page where you're selling the product the ad was plugging, you'll convert fewer sales. Have the ad go right to the page for that product. It means more advertisements, but it also means that you'll convert a higher percentage of clicks.

The real key to making it on adwords is writing good ads. That's an area where we do not pretend to be experts. However, if you're going to be spending a significant amount of money on your ads, it's a good idea to get advice from an expert. There are a number of Adwords gurus that have spread their gospel around the internet. A couple of the most successful are:

• Perry Marshall who will give you a free five day course to plug his Definitive Guide to Google Adwords.
• Google Cash by Chris Carpenter. He'll give you a major sales pitch, but he knows his stuff.

Those who do well in Google Adwords are usually those that are willing to put in the effort. If you make an ad, see that it's doing well, and then ignore it, the chances are that before long the ad won't be doing so well. Competitors may copy your ads, raise their bids, write better ads, or a whole new slew of competitors may enter the game. The drop off from being on the top of the first page to the bottom is not huge, and we feel you get better value for your money on the bottom. However, the drop off from the bottom of the first page to the second page is huge, and click throughs will plummet. To maintain that steady balance of being in a good position without overpaying, you need to keep constant watch on your ads and on google.

Fortunately, there is a bunch of software on the market that will help you do this. Some is fairly cheap, some is not. Here's a quick overview of what's on the market:

• Adgooroo will give you a great perspective on where you rank relative to your competition and what you need to do to improve. There's no reason not to at least use their free trial, though after that it can get costly, depending on how many keywords you want to track.
• Ad Archiver is a less sophisticated, but less expensive, version of Adgooroo.