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Google AdWords works on a model known as pay-per-click. When someone clicks on an AdWords ad, the advertiser of that ad has to pay Google a certain amount. It’s easy to track and fully automated.

We say “certain amount” because that amount is different all the time and is subject to market forces – in this case, bidding.

Something has to determine the placement of those ads, and what determines it is how much the advertiser offers to pay per click. When you submit this kind of ad to Google, you submit it with a bid – which is compared to other bids for similar keywords. It’s an auction style process.

The position of the AdWords ads is based on the bidding amount of keywords of an ad. Obviously, the higher the bid, the higher the position the bid buys you. For instance, if the highest bid for the keywords “Internet marketing” is 80 cents per click, you can get top position by bidding 90 cents.

Then every time someone clicks on your ad, Google would charge you 90 cents, and you would retain the top position until someone else bids more for the same search word placement.

Google AdSense, as stated earlier, is an extension of Google AdWords.

It takes the AdWords concept and moves it off of Google’s search page and onto thousands of other web pages. The ads that are displayed on the websites are Google AdWords ads.

It’s good for the advertiser, who gets more and broader displays, for Google, who charge more for this program, for you, who will make money from the clickthroughs on your pages, and also for the consumer, who will see cool ads for stuff they are probably interested in!

So how exactly are you making money from all this? You earn a share of the pay-per-click amount, every time a visitor clicks on the ad. So you just need to get ads on your site…

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