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Pay Per Click Advertising (PPC)

Pay per Click (PPC) is an internet advertising platform that uses keyword-targeted search engine and content ads delivered via an advertising network in order to garner web site traffic and sales. The process begins with the advertiser designing an ad and associating it with keywords/phrases that web users might select when browsing for content and/or products. An advertising network such as Google AdWords or Yahoo! Search Marketing launches the ad and negotiates its cost per user click (essentially, the pay per click). The ad may appear on the search engine results page (SERP) or on a content site like a blog. When web users click on the ad, the cost of the click is charged back to the advertiser.

While PPC utilizes an advertising model similar to that of cost per impression (CPI) or cost per mille (CPM), it is not the same as CPI/CPM. The latter receives flat-rate pricing based on the number of times visitors view an uploaded ad. A PPC ad may be uploaded indefinitely, but the advertiser is charged only when visitors actively click on the ad.

Contextual and PPC advertising are also often confused due to their similarities in appearance. However, contextual advertising involves advertisers placing bids on web sites instead of keywords/phrases. This results in a different pricing structure, advertiser bidding strategy, and return on investment (ROI). Please click on contextual advertising for more information.

While PPC ads may appear on both SERPs and on content pages, this page will focus strictly on search engine PPC due to its pricing complexity. The overall cost per click (CPC) of a PPC ad is determined by a number of factors, including the type of keyword/phrase on which the ad is based, how much potential revenue might be generated from the product sale, and whether the revenue is immediate or long-term. For example, Google AdWords charges a higher CPC for a PPC ad based on the keywords/phrases "golf ball" than "golf ball repair" because the former are input more frequently into search engines. Also, because some keywords generate extremely high and long-term revenue, the competition for these keywords will be fierce. Thus, advertisers will need to pay more money for a PPC ad based on the keyword "mortgage" than "golf ball".

CPC rates are also heavily dependent on Quality Score, a variable used by leading search engines such as Google, Yahoo, and MSN to help place and price ads. The Quality Score is determined by a number of variables, including the relevancy of the ad to its associated keywords/phrases, the adís click-through rate (CTR), and the relevancy of the landing page. These variables are input into a proprietary algorithm and the generated value is multiplied against the maximum bid amount that an advertiser is willing to pay for an ad. The stronger the Quality Score, the lower the adís CPC rate will be. Favorable pricing thus provides an incentive for advertisers to create dynamic, relevant, and optimized PPC ads. Better ads improve web user experience during online searches, increasing the chance of repeat visits to the respective search engine. Better ads also target prospective buyers by delivering the exact products for which they are searching, increasing the chance of product sales.

There are two types of pricing strategies for PPC: flat-rate and bid-based. With flat-rate PPC, the advertiser agrees to pay the advertising network a fixed amount of money per click. This fixed CPC will depend on the adís web page location; areas that attract different amounts of web traffic command different CPC rates. For this reason, many advertising networks publish fixed rate cards containing selected CPC locations and rates.

In bid-based PPC, advertisers participate in an auction for a keyword-based ad spot. As web site visitors input the selected keyword/phrase into a search engine, the bids of the advertisers are automatically increased. Typically, the advertiser that has paid the most money per click wins the bid and receives the most prominent position on the paid listings results page.

Advertisers who wish to further promote their PPC ads on the SERP can sign up with affiliate marketing networks such as Google AdSense, Clickbank and Commision Junction. These networks collaborate with affiliate marketers who post the PPC ads on their web sites and blogs. When a PPC ad posting results in a click or a sale, the revenue is shared by the advertiser, affiliate marketer, and affiliate marketing network. Advertisers may also work directly with affiliate marketers, so that ad revenue is shared by only two parties instead of three.

Due to the rising popularity of Internet-equipped mobile devices and YouTube, advertisers and affiliate marketers have been implementing mobile and YouTube PPC ads as well. In order to initiate mobile PPC, a mobile web site must be written or redesigned from an existing site using a mobile markup language such as XHTML. A scripting program, such as .php or .asp, is required for the ads to appear. A YouTube video campaign is initiated in much the same way as a standard, text-based PPC; however, instead of writing content for the ad, the advertiser publishes a video based on select keywords/phrases. As with the more traditional PPC, the advertiser is charged only when visitors view the video ad. Please click on Mobile and YouTube PPC to learn more.

One criticism of PPC advertising is that it carries the risk of click fraud. Affiliate marketers may purposely click on PPC ads in order to make money for themselves. Competitors may also click on PPC ads so that the advertiserís ad budget is depleted. There are even software programs designed for the sole purpose of clicking on and opening PPC ads. To combat this problem, advertisers often invest in fraud detection and tracking software, as well as frequent monitoring of click origin sites.

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