It is believed that Yahoo! pioneered the keyword advertising buy. In 1996, Chip Royce, marketing manager for InterZine Productions of Boca Raton, Florida, approached Yahoo!'s sales agent (Flycast Communications) seeking more effective, targeted advertising within Yahoo!'s search results. Yahoo! obliged placing targeted ad banners when the keyword "Golf" was searched by Yahoo! users. Yahoo! later turned this opportunity into a formal marketing program for its entire customer base and promoted this in a July 1996 article in the now defunct 'Internet World' magazine.
Google AdWords is the most well-known form of keyword advertising. Google displays search ads specifically targeted to the word(s) typed into a search box. These keyword targeted ads also appear on content sites based on Google's system's interpretation of the subject matter on each page of the site. This is known as contextual advertising.
A less common type of keyword advertising hyper-links individual words within the text of a page to small pop-ups displayed by mouseover. Advertising of this type is offered by Kontera, Vibrant Media, and LinkWorth. Kontera's version is named ContentLink, Vibrant Media's version is called IntelliTXT and LinkWorth's version is called LinkWords. They refer to their product as in-text placement. Advertisers choosing to test this type will want to exercise moderation to increase Internet user acceptance.
Pixel advertising, popularized by The Million Dollar Homepage is another type of keyword advertising. In pixel advertising, graphic advertising space is sold on a site. Often advertisers are charged per pixel, with a minimum of 10 by 10 pixel blocks. With keyword advertising, advertisers buy a text link on an advertising site. When the advertising space is sold out, a "word cloud" is formed, with an apparently random group of words, each linking to another internet site. Two of the first keyword advertising sites were 500words.com and awordsworth1000pictures.com, which were launched in mid-2006.
Keyword advertising is based on a principle of search engine optimization, which states that the anchor text of incoming hyperlinks to a site will cause search engines to associate the site with that term and improve the site's search engine ranking for that keyword.
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