Have you heard of Google Adwords? Probably you are already a little familiar with the Internet’s most powerful tool for promoting your business to the largest community of Internet users in the world. There is no bigger opportunity to reach out to customers all over the Internet than Google and its search partners. Using Adwords effectively can make your site pay for itself and earn you huge profits, but if you don’t really know what Google Adwords is and how it works, you may waste your ad money on subpar results.

Step #1 for creating ads that get traffic to your site from Adwords is to make sure you know what your potential visitors are looking for. It’s not all about keywords. You need to get into your visitors’ heads to know what they are looking for when they visit your site.

One way to understand what drives customers to your site is basic keyword research. Look at the keywords that are already on your site. Do some additional basic keyword research with tools like WordTracker and Keyword Discovery. Don’t limit yourself to the high KEI keywords you get from WordTracker or Keyword Discovery. Once you use the keyword search services, do some brainstorming to think of additional words and phrases that potential customers may be searching for that will lead them to content that your site can deliver. Make your list as long as you can. You can whittle it down as you get your campaign underway. Eventually you will have a few high-performing gems that bring you the highest Click Thru Rates (CTR) and conversions.

Don’t try to use all your keywords all at once. After you set up your Adwords account, Step #2 is to begin bringing a manageable list of search terms from your comprehensive list of keywords into your campaign. Create that first ad from the most promising keywords. Write just one more ad with the same keywords but different ad copy to see what really encourages your CTR. Making the ads slightly different helps you establish which wording gets you more traffic for your money. You will repeat this process over and over again as your AdWords campaign matures. You will find small changes in wording, punctuation, and capitalization that bring in incremental improvement?and sometimes dramatic improvement?in your click thrus and conversions.

Step #3 is to run the numbers to make sure you are using your ad budget wisely. Don’t spend your entire advertising budget before you have fine-tuned your ads. For some niches, just $100 a week will get you almost nowhere. For other niches, that same $100 a week will make an immediate difference in your site’s visibility. But no matter how much or how little you spend, check your returns against your investment. Google Adwords lets you to do this by setting goals, such as number of units of product sold. Careful attention to financial results tells you whether you are making your money back, and by how much.

The measure of a financially successful Adwords campaign is that it earns at least 50% return on investment. A 50% return will ensure that you can take some profits while still having money to grown your site. If you carefully test and retest every advertising decision as you go along, you can increase your ROI, pumping up your ad budget from the sales you get from Adwords.

Justin Harrison is a leading Internet Marketing consultant responsible for the Internet Marketing strategies behind some of the biggest online brands including Amazon, BBC, MasterCard and many others.