An Overview of Pay Per Click (PPC) Advertising

Pay per click (PPC) advertising has revolutionized advertising on the Internet. In order to understand PPC advertising, let’s discuss PPC, its history, and some background information.

Let’s start our discussion with a definition of pay per click advertising from Wikipedia.

From Wikipedia, the free encyclopedia

Pay per click (PPC) is an advertising technique used on websites, advertising networks, and search engines.

With search engines, pay per click advertisements are usually text ads placed near search results; when a site visitor clicks on the advertisement, the advertiser is charged a small amount. Variants include pay for placement and pay for ranking. Pay per click is also sometimes known as Cost Per Click (CPC).

While many companies exist in this space, Google AdWords and Yahoo! Search Marketing, which was formerly Overture, are the largest network operators as of 2006. MSN has started beta testing with their own PPC services MSN adCenter. Depending on the search engine, minimum prices per click start at US$0.01 (up to US$0.50). Very popular search terms can cost much more on popular engines. Abuse of the pay per click model can result in click fraud.

Pay per click advertising covers the three main search engines, but let’s concentrate on Google since it has the largest market share of searches on the Net. Pay per click advertising is where an advertiser creates an ad for a product or service that will be presented to a search engine (“SE”) user when the user searches on a specific key word or key word phrase. When you use an SE, you see the ads when you receive the results of the search. You have noticed that the ads are about the same information that you entered into the search. This is based on the keywords for which the ads are targeted.

The advertiser that puts the ad in the SE agrees that it will pay a certain amount to the SE each time the ad is clicked by a user. The order of presentation of the ads on the search engine results page depends on the price that the advertiser agrees to pay and the historical click-through rates of all ads shown for a given search.

This advertising concept has revolutionized Internet advertising and has created Google Adwords, Yahoo Search Marketing, and Microsoft Adcenter. In 2000 Google was the first to start a program of this type and it has developed into Google’s flagship product from which it derives the majority of its revenue.

Originally, Google permitted the Adwords ad to send the user directly to the advertisers site. Early in 2005, the policy changed and now you must link from the Google ad to a “landing page” (page where the searcher will be directed when the ad is clicked). The landing page is used to presell the readers and then send them on to the sales page of the company selling the service or product.

PPC advertising is a great way to make money as an affiliate. You identify a company that you want to promote, identify the keywords that searchers will use when searching for the company’s products, and set up a landing web page to receive the click from the SE. On the landing page, you place ad copy to sell the reader on clicking to the company’s site that you are representing. If the user clicks to the company site and takes the desired action (purchasing a product or completing a lead form), you are paid for the completion of the action. This will be a percent of the sale of a product or a flat payment for a sales lead.

Anyone can sign up for these programs and it is quite easy to do so. You can make money using this technique. However, before you think this will make you rich overnight, let’s get a little education on how it works.

When an SE presents your ad to a user, it is called an “impression”. When a user clicks on the ad, it is called a “click”. The SE develops a ratio called the click through rate (CTR) by dividing the clicks by the impressions. If your CTR remains high enough (this varies by SE’s, but usually above one percent is sufficient), your ad will continue to run. If it does not perform well, the SE will inactivate it until you change something about the ad to make it perform better.

Your account with the PPC program will have reports that show you the impressions, the clicks, the CTR. It will also show you your average cost per click, the total cost for the keyword (clicks time average cost), and the average position of the ad in the times it was displayed (first, second, third, etc.).

This is an exciting business model for creating supplemental income. If you want to learn more about Google Adwords, buy the “Adwords Bible” by Chris Chandler called Google Cash.

The best way to learn about PPC advertising is to set up an account on Google Adwords and experiment with a campaign. You can set a budget to prevent the campaign from costing you too much if your campaign results in your paying more for clicks than you make from your sales. Be cautious on your first few campaigns and limit your potential exposure.

Good luck with your PPC campaigns.