AdSense vs. AdWords: What's the difference?

Most of the readers of this blog probably don't read a techie-oriented blog like Joel Spolsky's Joel on Software, but Joel's entry yesterday titled Something rotten in AdSense makes for some interesting reading. In particular, it shows three things:

• That click fraud still hurts advertisers.
• The growth of splogs.
• The confusion of AdWords and AdSense.

Let's focus on that third item today, because I've talked about click fraud and splogs before (and probably not for the last time, either). I was kind of suprised to see someone technical like Joel confuse the two, but maybe he relied on someone else's faulty explanation. Unfortunately, his confusion of the two programs distracts from the meat of his complaint.

So what is AdWords? AdWords is Google's primary money maker, the main reason it's a profitable company. It's the program that advertisers use to place ads on Google's “content network”. It started out as a simple, self-service program for placing small pay-per-click text ads, but it's since expanded to include image ads, site targeting (showing ads on specific sites) and more traditional pay-per-impression advertising. Anyone with a valid credit card can use the AdWords program to start placing keyword-targeted advertisements in a matter of minutes.

So what is AdSense? AdSense is sort of the flip side of AdWords. It's a program (a set of programs, actually, but let's leave that for another discussion) that lets third-party (non-Google) websites (and blogs) rent space on their web pages to Google. Google then displays ads in those spaces from the pool of available AdWords advertisements and gives the owner of the site a cut of the revenues it makes from those ads.

So what is the Google “content network”? When advertisers create advertising campaigns with AdWords, they can actually control where the ads are shown. They can specify, for example, that ads only be shown on Google's own search engine result pages. (In fact, advertisers usually pay a premium for ads shown on the result pages.) Or they can choose to have them shown all over the Google “content network”, which includes not only the result pages but also partner sites and AdSense sites.

Don't get me wrong, click fraud is a big problem. However, I don't see Google abandoning its content network, including the AdSense programs, because it makes too much money from it. Which means some advertisers much be finding it useful. I'm sure the programs would implode on themselves if the weren't useful. And of course, Yahoo! just launched a very similar, competitive program. So obviously others think it's a working, valid model.

OK, OK, I really need to get back to my AdSense case study. I promise to venture back to it tomorrow.

Eric Giguere is the author of Make Easy Money with Google, a real (printed!) introductory AdSense book for non-technical people, available at all fine bookstores. Be sure to download the free sample chapter for more information about the book.

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