Pay Per Click Advertising 101

Pay per click (PPC) advertising is a form of advertising peculiar to the internet.It is used by websites that act as hosts to advertisers seeking to promote various products. When the advertisement is clicked, the advertiser pays a fee to the website host. The amount paid (CPC – cost per click) essentially depends on whether the advertisers are dealing with a content site or a search engine. In the case of the latter, a bidding system determines the rate, with advertisers bidding on the keyword phrases most relevant to the market they are targeting. With content websites there is normally a simple fixed fee per click.

In the affiliate model implemented by PPC in addition to the normal portal model where traffic is driven to a site, there are opportunities for purchase even with the casual internet surfer. Partner sites in an affiliate program are offered incentives in the form of a percentage of the takings to promote such purchasing opportunities, and these affiliate sites provide click-through to the seller of the product at the point where the product is purchased via the affiliate. This is an ideal structure for the seller of the product, as he pays the affiliate nothing if no sales are made. Banner exchange and revenue sharing schemes in addition to PPC are some of the numerous variations in this form of the pay-for-performance model.

In the full PPC set-up, an advertiser will provide a website with a list of keywords, and when a keyword query makes a match with one of these the advert pops up. The ad could also appear when content relevant to a particular product, even loosely, is displayed on the website. These so-called sponsored links and sponsored ads can be made to appear anywhere on the page that a developer chooses to position them, and also next to the results generated by search engines.

As with just about every other human activity, CCP is open to abuse and there are numerous cases of unscrupulous business competitors and unethical web developers abusing a basically sound system for financial gain, and this has resulted in the development of automated systems to guard against such misuse.

Flat rate and bid-based are the two models used to determine PPC. With flat rate, a fixed rate is agreed on by the advertiser and publisher for the fee charged for each click on the advert. Different areas of a website often have a different PPC that is determined by the content on particular pages of the site, and there are often the usual discounts for valued customers.

Bid-based PPC is a bit more complicated, with a number of advertisers competing in private auction or through a network for given ad spots using online tools. There is effectively an auction generated every time an ad is clicked. The same process plays out when the ad spot is part of a search engine results page and a search on the keyword is made.

Automated bid management systems are often deployed by agencies offering PPC as part of the service, with such systems frequently managing thousands or millions of bids.