The State of Google AdWords in 2001
A snapshot of Google AdWords in its first full year: still a flat-rate, self-serve experiment overshadowed by the pay-per-click model Overture had proven out.
Google AdWords launched on October 23, 2000, with a few hundred advertisers and a pitch that sounded almost quaint next to the pay-per-click model already gaining traction elsewhere: a self-service tool where any business could write a text ad, pick some keywords and go live without talking to a salesperson. A year into its life, AdWords in 2001 was still a small, unproven part of Google’s business, and the paid search landscape it sat in looked different from the one that would exist a few years later.
Still priced by the thousand impressions
Throughout 2001, AdWords ran on a cost-per-thousand-impressions (CPM) model rather than cost-per-click. Advertisers paid for their ad to be shown a set number of times, regardless of whether anyone clicked. That put the risk squarely on the advertiser: an ad with weak copy or a mismatched keyword list could burn through a budget on impressions that never converted, with no built-in mechanism to reward relevance. That changed only in February 2002, when Google introduced click-based pricing and began factoring click-through rate into ad ranking, a shift that came after the period this piece covers.
Overture, not Google, was the pay-per-click leader
The company defining pay-per-click advertising in 2001 was GoTo.com, which had launched a bid-based, cost-per-click auction model back in 1998 and would rename itself Overture Services later in 2001. Overture’s ads already appeared not just on its own site but syndicated across MSN, Yahoo and other major portals, giving it far more reach and a proven revenue model years ahead of Google’s advertising business. For most marketers weighing paid search budgets in 2001, Overture was the obvious starting point; AdWords was still a secondary, smaller-scale experiment.
A self-serve interface, low minimums
What AdWords did have going for it, even in this early form, was accessibility. There was no minimum contract, no account manager and no negotiated media buy required, in contrast to the traditional online advertising sales process most sites still used. A small business could set up a campaign directly through the web interface with a modest daily budget, a novelty at a time when most site advertising was still sold in bulk packages by ad networks and negotiated by phone.
Google’s priority was still search quality, not ad revenue
Google’s public focus in 2001 remained overwhelmingly on organic search relevance rather than monetization. The company was gaining market share against Yahoo, Excite and AltaVista on the strength of its search results, and advertising, while clearly part of the long-term plan, had not yet become the dominant driver of the business it would become after the 2002 pricing changes and the run-up to Google’s 2004 IPO.
Where it stood at year’s end
By the close of 2001, AdWords was a promising but distinctly minor product: CPM-priced, self-serve, easy to try and still far behind Overture’s click-based auction in both reach and revenue. The advertisers experimenting with it early were making a bet on Google’s future search dominance more than on AdWords itself as it existed that year.
Keep exploring: browse more Marketing Strategy guides, see everything we published in 2001 or check out the Digital Business Marketing Awards.
