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A business model can be defined as the method of doing business by which revenue can be generated. It is certain that Internet commerce gave rise to new kinds of business models. However, it is also certain that the web is also likely to reinvent well tested models.

Google company, starting from just a smart algorithm, has developed a principally new business model, which in a few years turned it into the world leading search engine.
Google has taken the risk of introducing a smart, innovative business model of Adwords and the pay per click concept, and this risk proved to be victorious. Today Adwords is the main source of Google’s revenues. By improving the nature of targeted ads, Google managed to create an extremely effective revenue generator. It is Google’s major goal to make their targeted ads at least as pertinent and useful to users as the search results themselves.

  Google AdWords product provides the text ads that can be viewed alongside of search results. The ads are associated with keywords that appear in searches. Google employs an auction-based system for its AdWords system that offer advertisers a possibility to bid on each keyword to define how much they will pay for a click on their ad.

In the recent years SEO managers have noticed a continuous keyword inflation. Putting it differently, bids for good keywords keep rising. In case an advertiser wants to be able to have their ad appear on Google search result pages based on a keyword relevant to their product offering, they have to continuously monitor the price of the keyword and maintain a bid high enough to have their ad active. If an advertiser does not do so, the keyword is seen as inactive by the AdWords system and the ad gets no impressions.

Naturally, the increased competition for the best keywords makes prices go up. In such a way it takes practically no investment on the part of Google. Thus, it is Google’s customers that are making the increase in ad revenues for Google. If advertisers want to keep afloat in the Google’s world, they have no choice but to pay.

This is the main reason why Google’s business model proved winning.