I do really not know as I'm still a beginner. But with that money, I would probably start off a vBulletin forum about gaming, lifestyle or any other kind.
at first i would buy a keyword research tool then select some good and average keywords. then i wout start my 1st Adword campaigning.
A lot depends on the site niche and also whether the content is targeted towards an online or offline audience. Try and promote it on similar type websites as your own site make-up. Google clicks can be costly and I would avoid that unless it is a paid product/service that you are trying to sell.
I wouldn't hire an SEO. A good SEO won't do much with £500 and a bad one won't do anything (however cheap they look). I'd start doing my own SEO then do some research on AdWords and start trialling some campaigns.
What are you selling? Have you done the market research to find out where the buyers are? Have you done keyword research? What's your level of experience? What tools do you have and where are you in the process? What's your market? Offline or online buyer? I have more questions than answers. Remember, you're not marketing a site, you're marketing a product or service so you need to know what the buyers are searching for.
I guess it would be better to understand what you are doing first before starting out.Join a good membership site to learn the basics of internet marketing. Try this:chrisfarrellmembership.com/hg/?a=3StdNWZ9 It provides a lot of free value and i think it is really good. factsonmakingmoneyonline.com (Making Money Online For Beginners)
I would spend $100 testing adword campaigns (assuming there is some money to be made somewhere from the site I am marketing). Depending on how successful that was, I would continue and spend the rest the same way or improve my product/site for better conversions. If I'm just looking for traffic, I would put into SEO and linkbuilding.
I would try out some Adwords landing pages, and based on its performance develop a site specifically for it
£500 doesn't get much marketing if you pay the pros. Adwords would probably eat it before you made your campaign profitable. If it was me, I'd run my own marketing campaign and outsource the grunt work like writing, linkbuilding, etc.
Sniff out a really good SEO firm who will give me my money's worth. Check them out and if I see results then continue with them.
Get a designer and have him make an awesome logo, design, etc. for your site. Create genius content. Keep blogging/people interested. Don't buy crap.
Wouldn't spend it, but invest it, to build a biz, and create a steady stream of $500 per month, week, and per day over time.
The member above is right, dont waste it, invested in sites you see have a future and you will get alot more.