Google has always wanted to make money - it is a business after all largely owned by Venture Capitalists. But Google's fundamental philosophy has been about helping people find the information they want on the web without cluttering up the process with a bazillion ads that flashed and blinked everywhere. So they started off developing AdWords on the basis that they were discrete, text-only and RELEVANT to the searcher. You rarely see AdWords ads that are of no relevance to you - partly because any vaguely smart advertiser won't want to waste time targeting unlikely customer bases, and more significantly, because web users can effectively vote off irrelevant ads: an AdWords ad that fails to get a decent click thru rate (0.5%) gets shoved into hibernation by Google.
AdWords thus enabled Google to make money whilst remaining largely faithful to their philosophy - ads were small and useful and relevant. So then they began to think about expanding the program to third party sites, sites that in many cases were already using Google as a search tool. It made sense to do this because it increased Google's revenues without detracting from the user experience. Initially Google worked with major partner sites and once this all worked fine, they broadened out the program to AdSense - to exploit the commercial opportunities created by their excellent search technology.
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