Pay-per-click (PPC) is an online advertising model in which an advertiser pays a publisher every time an advertisement link is “clicked” on. Alternatively, PPC is known as the cost-per-click (CPC) model. The pay-per-click model is offered primarily by search engines (e.g., Google) and social networks (e.g., Facebook). Google Ads, Facebook Ads, and Twitter Ads are the most popular platforms for PPC advertising.

 

 How PPC Model Works

The pay-per-click model is primarily based on keywords. For example, in search engines, online ads (also known as sponsored links) only appear when someone searches a keyword related to the product or service being advertised. Therefore, companies that rely on pay-per-click advertising models research and analyze the keywords most applicable to their products or services. Investing in relevant keywords can result in a higher number of clicks and, eventually, higher profits.

 

The PPC model is considered to be beneficial for both advertisers and publishers. For advertisers, the model is advantageous because it provides an opportunity to advertise products or services to a specific audience who is actively searching for related content. In addition, a well-designed PPC advertising campaign allows an advertiser to save a substantial amount of money as the value of each visit (click) from a potential customer exceeds the cost of the click paid to a publisher.

 

For publishers, the pay-per-click model provides a primary revenue stream. Think about Google and Facebook, which provide free services to their customers (free web searches and social networking). Online companies are able to monetize their free products using online advertising, particularly the PPC model.

 

 Pay-Per-Click Models

Commonly, pay-per-click advertising rates are determined using the flat-rate model or the bid-based model.

 

1. Flat-rate model

In the flat rate pay-per-click model, an advertiser pays a publisher a fixed fee for each click. Publishers generally keep a list of different PPC rates that apply to different areas of their website. Note that publishers are generally open to negotiations regarding the price. A publisher is very likely to lower the fixed price if an advertiser offers a long-term or a high-value contract.

 

2. Bid-based model

In the bid-based model, each advertiser makes a bid with a maximum amount of money they are willing to pay for an advertising spot. Then, a publisher undertakes an auction using automated tools. An auction is run whenever a visitor triggers the ad spot.

 

Note that the winner of an auction is generally determined by the rank, not the total amount, of money offered. The rank considers both the amount of money offered and the quality of the content offered by an advertiser. Thus, the relevance of the content is as important as the bid.

 

PPC ads come in different shapes and sizes (literally), and can be made up of text, images, videos, or a combination. They can appear on search engines, websites, social media platforms, and more.

 

How does PPC advertising work

PPC advertising looks different from platform to platform, but in general, the process is as follows:

 

Choose your campaign type based on your objective.

Refine your settings and targeting (audiences, devices, locations, schedule, etc.).

Provide your budget and bidding strategy.

Input your destination URL (landing page).

Build your ad.

 

Once the ad goes live, where and when your ad appears, and how much you pay for a click on it are all determined algorithmically based on your budget, bid, campaign settings, and the quality and relevance of your ad. Since all platforms that offer PPC advertising want to keep their users satisfied, they reward advertisers who create relevant, trustworthy pay-per-click campaigns with higher ad positioning and lower costs. So if you want to maximize your profits from PPC, you need to learn how to do it right.

 

Google Ads is the single most popular PPC advertising system in the world. The Google Ads platform enables businesses to create ads that appear on Google’s search engine and other Google properties.

 

Every time a search is initiated, Google digs into the pool of ads and chooses a set of winners to appear on that search engine results page.

 

How PPC works in Google Ads

When advertisers create an ad, they choose a set of keywords to target with that ad and place a bid on each keyword. So if you bid on the keyword “pet adoption,” you are telling Google you want your ad to appear for searches that match or are related to pet adoption (more on keyword match types here).

 

Google uses a set of formulas and an auction-style process to decide which ads get to appear for any one search. If your ad is entered into the auction, it will first give you a Quality Score from one to 10 based on your ad’s relevance to the keyword, your expected click-through rate, and landing page quality.

 

It will then multiply your Quality Score by your maximum bid (the most you’re willing to pay for a click on that ad) to determine your Ad Rank. The ads with the highest Ad Rank scores are the ones that show.

 

This system allows winning advertisers to reach potential customers at a cost that fits their budget. It’s essentially a kind of auction. The below infographic illustrates how the Google Ads auction works.