Very well written. I don’t entirely know about the statistical application of Adwords for site traffic. There are numerous variables that make it VERY hard to quatify exactly what the result of your advertising efforts might be. As a previous post suggests, a content site (without registration) may not expect all traffic from adwords. However, through adwords they can get exposure, through this, with valuable content, one can hope to have a few visitors link to your site, bookmark it, share it, etc. These activities can help to raise the ranking within Google so that those keywords you pay for, actually bring your site up for Free in the regular results.
I think Paid advertising is most effective for sales based sites (or registrations with the intent to sell via subscription). This type of traffic can be quatified by effort. That is to say through careful analysis one can spend x dollars and hope to expect y$ back. The trick is to have the money spent exceeded by the conversion $$ earned.

As for viral… The word sounds bad but really, viral marketing has been around long before the web. Anytime you tell a friend, I loved that book or movie or CD, they are marketing for that product. The web is the same really. We as web marketers (and regular surfers) become familiar with the “best” sites and we share.
I currently have an page set up just for this purpose. I have a pile of links on this one page to various resources and tools that I think are great. Many of the site authors, I have never met, and many are not affiliate links. The insentive is simply to share. And most people do like to share. If it is useful, people will say so. And of course if its not, folks will say so

Thanks so much for your post! I really enjoyed the read and am glad I found it.

Jeromy
http://hillbillydirect.com

ps A good way to start with Paid advertising is to look for promotions that offer free credit for a service you may have purchased anyone. The most common is webhosting, Many hosts offer an assortment of free ad credits to new customers. Another is some membership sites. Look around before joining any network to see if there is any good deals to get ad credits.

Great post..not sure if I agree with all of your assumptions:

a) You assume that a website must have a registration wall that causes a “bounce” for 90% of all traffic. That doesn’t sound appropriate for sites that don’t have registration, sites that are simply informational in nature and just depend upon amassing pageviews (not registration)

b) If the site is a simple transactional service (car information, for example) – isn’t it true that there is very little chance that the site could be viral? If so, why should that site optimize for virality when they could build a successful business without it?

Would love to hear your opinions.