To use Dynamic Keyword insertion, you format your ad headline so that WHATEVER the customer has typed into the search box appears in YOUR ad headline. It's structured like this:

{KeyWord:Alternative Text}

KeyWord = whatever the user has typed in.

Alternative Text = default text, just in case the keyword typed in exceeds the headline limit of 25 characters.

As an example, say you're promoting mobile phones. You might have keyword lists specific to individual brands. For instance, you have an Adgroup that includes all Palm models, another for Nokia, another for LG. So for instance, for Palm, you structure your ad like this:

{KeyWord:Discount on Palm Phones}

Now if a customer types in “Palm Treo 800W”, your ad is triggered and the keyword "Palm Treo 800W" becomes the headline. The customer's attention is drawn to your ad because you have delivered exactly what they asked for. If for instance, the customer types in something like “Where to buy Palm Treo 800W”, which exceeds the 25 character limit, the default text is inserted in the headline: "Discount on Palm Phones". You're still giving the customer what he/she wants.

It's important that the format is correctly adhered to.

Braces { } must enclose the entire headline.

A colon : must seperate the keyword and the default text.

There must not be ANY spaces between the braces and text or colon and text.

For example this is incorrect:

{ KeyWord :Discount on Palm Phones}

This should be written as:

{KeyWord:Discount on Palm Phones}

Dynamic Keyword Insertion minimizes the work needed to manage larger ad groups and campaigns. It also enhances your click through and conversion rate.

One thing to keep in mind though, is that it is important to tightly relate your keywords to your ad groups. If your ad group encompasses keywords that are only loosely related, you will have a much harder time coming up with default text that will be relevant for all the keywords.

To use the previously mentioned example. Imagine that instead of separate ad groups by brand names, you put all your keywords into one ad group called “Mobile phones” For your ad, you use the following text:

{KeyWord:Discount Mobile Phones}

Now if someone comes along and types the following into the search box:

“Where to buy Palm Treo 800W”

Your ad pops up with “Discount Mobile Phones”. Not a bad result, but not nearly as relevant as “Discount on Palm Phones”.

Don't forget that Dynamic keyword insertion lets an advertiser designate a spot anywhere in the ad where a keyword will be inserted. This means you can use it with your 2 lines of description.
Say your keyword list for a seafood recipe instructional DVD is:

Shrimp
Crab
Lobster

You could structure your ad like this:

{KeyWord:Shellfish} Recipes on DVD
Mouth-watering{KeyWord:Shellfish} Bisque
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