A web site is sort of like a retail store. It's not enough to just get people to wander in. You have to merchandise your offerings and actually sell stuff.
A problem with AdWords is that people tend to think it's a low-cost way to draw lots of attention. That may be true, but AdWords aren't all that different from any other media channel in that advertisers with larger budgets are going to be able to buy the most attention. The best way to really combat competitors with bigger budgets is with creativity. Demand attention for your message.