One of the most popular types of online advertising involves buying an ad-link on search engines like Google, Yahoo, or Bing. Advertisers can narrowly target potential customers by buying an ad that will be placed next to the search results for a specific term. For instance, if you used Yahoo search engine and typed in "spaghetti," you would get 13 million results, ranging from spaghetti recipes, to encyclopedia references, to a link for the "Church of the Flying Spaghetti Monster." In the right column are "sponsored results"ads for spaghetti cookbooks, pasta making equipment, and several distributors of spaghetti sauce.

Each search engine's advertising system is unique, but you can get a basic understanding of the process by investigating Google's system called "AdWords." Go to the AdWords website and then answer the following questions.

1. Explain how the price of an ad on Google is calculated.
2. When purchasing search term advertising, a critical decision is identifying as many possible key terms to describe your product as possible. Suppose you were an online organic food store and you wanted to advertise your vegetarian spaghetti sauce on Google. What specific keywords would you want to include? (Hint:Use the "keyword tool.") List the best prospects.
3. Assume your daily advertising budget is $50. What would be the best combination of key terms and cost per click to reach your target audience