Do you guys use paid advertising to promote your websites? for example adwords or buying banner ads on other sites? Is it really worth it, does the traffic come back after you stop advertising?
Yes and sometimes yes. Depends what sort of business it is, but if it's the sort that gets repeat custom, thinking of your advertising as paying for long term customers, rather than just one-off sales, may make it worth investing in.
It can work, it can also be a zero return money pit. You can get best results from using a mix of free and paid ads in graphic and text variations...
Based on my experience I wouldn't use adwords. I would use organic SEO because you get free targeted visitors. For example, you might pay 75 dollars a day for 150 visitors a day (at .50 a click). You could get those same visitors for nothing via SEO. Of course it takes a few months to develop good rankings but it's worth it. I would spend my money on SEO books and not adwords. Of course some people have made money in SEO so I suppose it depends on the niche. But for some reason adwords is a waste of money for me. But it was a fun but expensive experiment.