What Is Pay Per Click Advertising?

pay per clickIn recent years, paid searches have been increasingly used on the internet as a method of advertising. It employs the same techniques utilised by search engines. When an internet user types a word or phrase into a search engine, the results page returns a list of websites that are relevant to the words that have been input – this list of results is referred to as the organic search results. On the same page, there are often sponsored links, and these are the paid searches – the owner of a website has paid for their advert to appear on the search result page when certain words or phrases are entered into a search engine.

Pay-per-click (PPC) (also referred to as cost-per-click, CPC) is a revenue model utilised in online advertising. It is a strategy often employed by search engines as a method of determining income from paid searches. The current forefront runners utilising PPC are Google AdWords and Bing AdCenter. Both operate in a similar fashion; companies who wish to attract traffic to their website decide on a campaign to advertise their product. They draw up a list of keywords, or phrases, that are relevant to their campaign and if an internet user types in one of these words or phrases into a search engine, the campaign advert appears as one of the sponsored links on the search result page.

pay per click advertising

At this stage, the company does not owe the search engine host any money. It is only when the user clicks on the sponsored advert that revenue has now been generated. How much the company pays for each click on their advert depends on the model that has been agreed – whilst some sites offer fixed-fee pricing for each click, Google and Bing operate a bid system, whereby companies bid against each other for the advertising space. The price of the bid will depend on a number of factors, the most important being the popularity of the keyword with the most popular requiring a higher bid in order to win the advertising space (a case of supply and demand). However, another factor that is taken into account is the quality of the advert, thereby allowing lower bids with higher quality adverts to ‘win’ the auction and be placed in the most prominent postion on the web page. If the advert is then clicked on, they pay the price that was bid to the search engine host.

The success of PPC campaigns can be measured in a number of ways. The click-through rate (CTR) measures the number of times the advert is clicked on, divided by how many times the advert appeared in response to the appropriate keywords. The conversion rate is the number of times that a user clicks on the advert and then performs the desired outcome on the website, divided by the number of clicks on the advert. An outcome could be a number of different activities, such as the sale of a product, completion of a survey, or providing contact details.

About the Author

Andy Morley is them MD at TWDG Ltd, a small web agency based in the UK. Andy is a highly experienced SEO specialist and has been working within the web industry since 1999.