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How do I know this? I created some campaigns targeted at French surfers only. Just to try my luck, I went to Google.Fr and searched for the keywords in question.. and they came up even though I'm in the UK and use a UK ISP. Simply going to Google.Fr meant I could see the French ads.
So, yeah, IP might be a major factor, but going to Google.fr allowed me to see my France-only ads. One imagines, however, that truly French sufers will see my France-only ads on whatever Google they use.
So it would interesting to know if using a local Google overrides the preset IP-based localization.
Yes. Local Google does override the IP address.
Do this test - I am assuming that you are from the US.
Goto Google.com and type in a keyword used by advertisers that is NOT international. For example, any keyword used by credit card advertisers. That's because an US based credit card advertiser will not be interested in traffic from other countries.
Open a new browser window and goto Google.co.uk and type in the same keyword. You will see completely different adwords ads, some of them will even insert UK into the title of the ad.
Ah, but the plot gets even thicker than that!
I mostly use the Google Toolbar, but sometimes I go to Google.com anyway. When I go to Google.com, I get all the regular .com stuff, and not the UK screen. There's no option to select UK sites, like on the UK version, and no redirection (as opposed to what happens to, say, Belgian surfers who always get redirected to google.be).
BUT.. I don't get any of the US holiday pics. I know this because someone on IRC told me to go and look at the MLK holiday logo on Google, and I went along, refreshed several times, and it didn't come up.
So, Google is screening in some ways, but they don't actually redirect UK users specifically to the UK site.