As you probably know, Google AdWords is a pay-per-click marketing system, which is a great way to get traffic to your site. But if you don't know the ins and outs, it can end up costing you a lot of money and not making you any.

So, what's the key to success with AdWords? Well, I wish I could tell you there were one or two simple tricks, but the fact is, the best way to ensure success with AdWords is to be familiar with every aspect of the system. This will likely take weeks or months of research, plus a few bucks spent testing out a real AdWords account. However, you can greatly increase your chances by following this bit of advice: don't skimp on the keyword research!

Maybe you had it in your head that you could go through your site, grab 20 or 30 words or phrases, load them into an ad group, and you'd be watching the traffic and sales pour in. This is simply not the case. Keyword research should be the most time-consuming part of setting up any campaign; not only that, but you should be doing it all the time. That's rightnever stop building your keyword list. Okay, now let me explain a few things:

First, you need to understand how Google uses your keywords to show your ads. You place a bid that determines your maximum cost per click (CPC) for each keyword. This can be different for every single keyword, if you wish. This bid does not represent the amount you'll pay for each click (like on Overture); this is just the maximum you'll ever pay for any single click. For example, if you have a max CPC of $0.50 set for a keyword, you'll only have to pay the full amount if someone else bids $0.49. If that person decides to lower his bid to $0.30, you'll only pay $0.31. This is because Google's bid discounter only charges you one cent more than the next highest bidder, no matter what your max CPC is. Theoretically, then, you could bid $10 or even $100 and still only pay $0.31 for a click.

But that's not all! As you start getting impressions (i.e., your ad shows up in the search results) and clicks, you'll have a click-through rate (CTR). This represents the number of clicks you receive per 100 impressions. Here's the really beautiful thing about AdWords: the higher your CTR, the lower your click cost. Because Google values relevance, you'll receive a bonus for having a relevant ad, and CTR is the primary indicator of how relevant your ad is. So, let's say you're competing with someone for ad position No. 3 on the search results page for a particular keyword. Your max bid is $0.50 and his is $1. He should be way above you, right? Not necessarily. Suppose you have a CTR of 5%, and his is only 1%. Google factors in CTR when calculating ad positions, so you end up with this: max CPCCTR = (what we'll call) ranking factor. In this case, your ranking factor is 0.025, while your competitor's is only 0.01. Which means your ad shows above his for $0.50, even though he's willing to pay up to $1!

Okay, so now you know the basics of how keywords work in AdWords and how Google charges you for clicks. What's next? Keyword research. The best way to go about this is to use WordTracker. I won't get really specific about how WordTracker works, because they've got a ton of information right there on the sitejust go do some reading there when you finish this article. Basically, though, WordTracker will help you find the best keywords to use in your AdWords campaign. You type in any word, and you'll get up to 300 related terms, which you can then click on to find a few hundred variations of that term. The terms you'll get are all terms from WordTracker's search query database, which uses metacrawlers to compile information (again, they explain it on their site if you're really interested). So you know that all the words you find there are real terms that people are actually searching for. Even better, you get a prediction of how many searches to expect per day for any keyword, how many times it shows up in their database, and a KEI value to determine your best words (KEI stands for Keyword Effectiveness Index, which you can also read about on the site). You can get a free trial, or you can sign up for a single day to test it out with all the features included (a day's membership is just a few bucks).

There are some free keyword research tools you can use, but I recommend these only for absolute newcomers who have no budget to start out with. Overture's Keyword Inventory is a good, free resource, but there's a catch: it shows results only for searches done through www.yahoo.com. If you're marketing with Google AdWords, you should know that Google accounts for at least twice as many searches as Yahoo!, in some cases three or four times as many. (Though reports vary, Google usually receives credit for about 50-60% of all searches, while Yahoo! gets about 20-30%but this is based on all searches, and results for individual searches may vary widely.) You may find other 'free' tools or downloadable programs that claim to help you with keyword research, but I say don't bother with them. You get what you pay for. Most of them just pull their results directly from other free online tools, and they don't offer anything in the way of features unless you buy the 'full version.' If you're out to get one for free, just use Overture. (Google's own traffic estimator is decent, but it doesn't give you an exact count for searches within a given period; you just get status bars, which are hard to interpret. Google's bid and position estimates are also usually way off.)

But third-party tools, even if they're very good, won't do your keyword research for you. You'll have to pick through your web site (or your affiliate's sales letter) for words and phrases that you can use. Then, using those words, see if you can think of similar words or concepts that people might be searching for. There's no real trick to this; you've just got to do a lot of brainstorming. Once you've got a good core list, take that over to WordTracker to beef it up. (Hint: If you see any words that don't directly relate to your product, service, or niche, add them as negative matches.)

Now you should have a lean but healthy keyword list. This is your first step to beating out your competition on Google AdWords.