With the formidable arsenal of products that Google presents to the world, from maps and photos to mobile software and video-sharing, it is easy to forget that this is an empire built on a deceptively simple advertising model – one shackled to the extraordinary and unrelenting rise of the web and web search.

By far the most significant of its advertising products is Google AdWords, which turned 10 years old on Saturday. Nearly 97% – $22.889bn – of Google's 2009 revenues were generated by advertising, and the majority of that through AdWords – the sponsored listings that appear next to search results. Would it be fair, then, to call Google an advertising company?

Matt Brittin, its managing director for the UK and Ireland, insists Google is primarily a technology company. "Our founders and CEO are computer scientists, as are many of our management team, and we get kicks by using computer science to solve complicated problems. That revenue model has allowed us to invest in other things ... doing interesting things on mobile and on products like Google Earth that are 'wow moments' for people using the internet."

When it launched on 23 October 2000, AdWords had 350 customers who paid per thousand impressions. In 2002, AdWords opened in the UK; the first advertiser was a live lobster mail order firm. AdWords, says Brittin, gave businesses the ability to access "hot leads", to find a customer at the point when they needed that service. Google won't say how many businesses use AdWords, but at its peak 3,000 new accounts were opened in the UK every day and it is still growing 10-15% each year. The overwhelming majority are small and medium-size businesses. AdWords offers a way to grow that "wasn't possible to them before – the market was just too inefficient," says Brittin.

Doesn't that mean many clients would traditionally have gone to local newspapers? "The internet does present challenges and opportunities for those businesses, but they are under threat from players focused on jobs, property and homes, which is where the majority of classified revenues are centred. Consumers and advertisers have got more choice than ever before."

Business in bees has been buzzing since Omlet launched its Beehaus early in 2009. Founded by four graduates of the Royal College of Art, Omlet made its name with chic hen houses and has exclusively been using AdWords to market its new beehive product. Omlet's chief executive, James Tuthill, says that Beehaus sales now double every six months, and AdWords generates roughly 70% of incoming clicks.

"AdWords was the only way we could afford to start advertising, because we could spend a small amount in a very targeted way and get results quickly," he adds. "We didn't know how to market the Beehaus, and though there's a bit of a black art to AdWords and it's not always completely clear, you can measure and see what works."

AdWords results depend on the quirks of user behaviour, and how they respond to certain words and phrases more than others, so the art is to work out the most likely search phrases to place your ad next to – a bit like Blankety Blank.

Omlet will have benefited from the large UK online market; it is Google's largest market outside the US and renowned for its advanced consumer behaviour, says Brittin.

While Google is continuing to improve AdWords with features including multiple site links and user ratings in ads, it will also aim to bring the same experience to mobile – as indicated by its $750m acquisition of the mobile advertising firm AdMob. "Competition for Google in the desktop space is more from Facebook and Twitter than from display or anything else, because they are closer to the Google search advertising model, certainly from the point of view of advertisers," says Vincent Letang, senior analyst and head of advertising research at Screen Digest.

Increased competition from similar ad systems such as Microsoft Bing could be good for Google, as a smaller market share would free it from the kind of regulatory scrutiny that followed the AdMob deal.

Letang says Google can afford to accommodate rumblings of discontent from some of its larger advertisers, who object to the recent decision not to restrict brand advertising to the brand owner. "It means many brands, at least for some time, will feel compelled to preemptively bid on their own brand names to keep competitors at bay." While Google says the policy means more choice for consumers, it also conveniently means more ad revenue.

But, as ever with the internet, nothing is certain – least of all the future. "The really big challenge for Google is to establish themselves in the mobile-connected space. Their firepower in ad sales, mapping and contextual information is a great asset, but there is no guarantee they will dominate as they have in the PC-centric era of the 2000s," says Letang.

• This article was amended on 25 October 2010 to change the original sentence "Letang says Google can afford to accommodate rumblings of discontent from some of its larger advertisers, who object to the recent decision to restrict brand advertising to the brand owner" to the current version.