What are Keywords?
Keywords are words or phrases that are entered into search engines. They are also the individual words and phrases that appear in websites.
Keywords matter because they underpin most of the traffic on the internet. The keywords in your web pages will partly determine where you page ranks for a given search: if the keywords being searched for using a search engine appear prominently on your site you are more likely to rank high for that search than if they don’t appear much.
As the internet evolved it quickly became clear that some keywords have a value. As an example, consider someone who is searching using the keyword “discount life insurance”. They are probably in the market to buy life insurance and so it would make sense for companies selling life insurance to try and get that person to visit their site. To understand the true commercial value of such a search suppose that 1 in 10 people going to a life insurance site end up buying a policy and that each policy makes $200 profit for the company. If they were to pay $10 a visit they would make $100 in profit for every $100 spent.
In fact that is how Google makes money from its AdWords system. Businesses buy search traffic by displaying ads when specific keywords are used in a search. Provided this traffic has a high conversion rate, the process is profitable.
Keywords in web pages matter because they will determine what sort of traffic you get from the search engines. With the advent of AdSense, website owners realised that it made sense to build websites that would attract high paying AdSense ads. Such ads would appear on web pages about profitable topics.
So what happened very early on was that people started to research and sell lists of high paying keywords. These are words that people were bidding aggressively for in AdWords. The theory was that if they could get natural, or free, search engine traffic to these pages and have AdSense ads on these pages for valuable products and services, they would get paid more per click.
This situation got out of control for a short while until Google started to allow advertisers to set different bid prices for AdSense ads than those for search ads in the AdWords system.