Google AdWords Turns 15: A Look Back At The Origins Of A $60 Billion Business

AdWords turns 15 this month. The official birthday is October 23, but Google is celebrating the milestone today. Google’s not much of a stickler for exact birthdays, though; the company marked AdWords’ 10th birthday on November 8, 2010.

AdWords indisputably changed the trajectory of online advertising with its self-serve keyword bidding system and propelled Google to become the multi-billion-dollar business that is now the cornerstone of the holding company Alphabet. In 2014, Google reported ad revenues totaling more than $62 billion.

The Launch of AdWords

AdWords came out of a roughly month-long beta with about 350 advertisers in October 2000. With the launch, Larry Page, Google’s co-founder and CEO, said of the new ad product, “AdWords offers the most technologically advanced features available, enabling any advertiser to quickly design a flexible program that best fits its online marketing goals and budget.”

AdWords was actually Google’s second advertising program. The first, called Premium Sponsorships, launched just months before, in August 2000. A direct sales team sold the premium sponsorship ads on a CPM basis. The premium ads appeared in the top spot in the search results, while the AdWords ads ran in the right rail. In a matter of a few years, the AdWords self-serve system subsumed the premium program.

The Simple Days Of 20 Million Searches

Not only did AdWords debut in a time when desktop reigned, Google was a significantly smaller engine then. In 2000, Google said users were conducting more than 20 million searches per day on google.com. Fifteen years later, the search engine handles more than three billion searches per day. More than half of those searches now come from mobile devices.

And of course now, advertisers can run campaigns on YouTube, the Google Display Network and Google’s mobile app network, AdMob, all through the AdWords interface. Google reported $16.8 billion in ad revenues across its platforms in Q3 2015, up 13 percent from the previous year. Google doesn’t break out how much of that ad revenue comes from search, but it’s a significant majority.

The Current Search Landscape: Yahoo-Google?

Overall, search advertising accounts for half of all internet ad spend in the US, which topped $27.5 billion in the first half of 2015, according to the IAB. That includes search ad spend on Bing and Yahoo, but Google maintains nearly 64 percent of search share on desktop and almost 90 percent of mobile in the US.

Bing achieved profitability last quarter, according to Microsoft, thanks in large part to Windows 10, but the search engine has very low market share on mobile. That’s where Yahoo hopes to make its mark with Gemini, though Yahoo is also now looking to Google (again) to supplement monetization on both mobile and desktop queries if regulators play along.

Challenging Display Environment

While Google has managed to remain dominant in search, the company has faced mounting competition on the display side, in particular, with the shift to mobile and rise of both social app usage and investment in native display advertising. Facebook has overtaken Google in display revenue share, according to eMarketer. Facebook is expected to hold 25 percent share of display ad revenues in the US, compared to Google’s 13 percent share in 2015.

Transformative Changes: Google Shopping & Enhanced Campaigns

The two biggest changes to AdWords in recent years were the transition of product search to the paid version of Google Shopping in 2012 and the transition to Enhanced Campaigns in 2013, which effectively made mobile a must-do for advertisers. Product listing ads now make up a significant portion of retailers’ search spend on Google, and Goldman Sachs estimates roughly 20 percent of Google’s ad revenue now comes from mobile. (If you think I’ve overlooked a significant update, let me know on Twitter.)

In 15 years, Google has grown its AdWords advertiser base from the 350 that came along for the beta to more than one million. For more fun facts (the troubling manscaping trend notwithstanding), check out the infographic Google put together to commemorate AdWords’ 15th birthday below. Happy slightly belated birthday, AdWords.