The Washington Post
explains how Google gets 95% of their revenue--by selling
context-sensitive ads to web searches and partner websites. Advertisers pay only when a user clicks on their ad, and "those clicks generated about 95 percent of the company's nearly $1 billion in revenue" last year.
The article profiles Gateway's purchase of keywords like "digital camera," which costs 75 cents--a "very efficient marketing program" for Gateway. (Interestingly, the plural "
digital cameras" costs $1.08 because people searching the plural are more likely to buy.)
The actual price of each ad is determined by a real-time auction, plus a relevance factor--if users aren't clicking your ad when it's displayed, Google will reduce its prominence, no matter how much you're willing to pay.
Ads can cost as little as 5 cents or $30 or more per click. The keyword "
mesothelioma"
has been bid up to $30 or so, since mesothelioma links to lucrative legal or medical services for asbestos victims.
Web site partners receive a portion of this revenue when they allow Google to serve ads to their sites and users click through.
