AdWords is Google's online advertising service that places advertising copy at the top or bottom or beside, the list of results Google displays for a particular search query.
The idea was first invented by Bill Gross of Idealab who borrowed the idea from Yellow Pages. Google wanted to buy the idea but a deal could not be made. Since Google was already in motion and interested in the idea, it didn't want to give up in having this kind of advertisement. As a solution, the company launched AdWords.
AdWords followed a model that was significantly similar to Bill Gross' creation which led to legal action between the two parties. Eventually the dispute was settled out of court.
At first, AdWords advertisers would pay a monthly amount, and Google would then set up and manage their campaign. To reach more advertisers, Google then introduced the AdWords self-service portal. AdWords offers cost-per-click (CPC) advertising, cost-per-thousand-impressions or cost-per-mille (CPM) advertising, and site-targeted advertising for text, banner, and rich-media ads. The AdWords program includes local, national, and international distribution. The choice and placement of the ads is based in part on a proprietary determination of the relevance of the search query to the advertising copy.
AdWords has evolved into Google's main source of revenue.