PPC Advertising: What Is It & How Does It Work?

A Beginner’s Guide to Pay-Per-Click Advertising: What Is PPC & How Does It Work?

Are you leveraging all that Pay-per-click advertising offers to boost your online marketing campaigns? If not, it’s high time you did because you’re missing out on valuable traffic and revenue at your fingertips. If you’re serious about achieving tangible scaling and growth and reign over SERPs, PPC advertising should undoubtedly be a part of your digital marketing strategy stack.

Want to leverage all they offer, but you’re unsure how to tap into the immense power of Pay-Per-Click ads? Don’t sweat it – our in-depth guide to Pay-Per-Click Advertising is here to help you break down the PPC lingo, learn the ropes, and connect the crucial pieces of the marvelous PPC puzzle.

Let’s dive right in!

Paid Advertising 101: What Is PPC (Pay-Per-Click) Advertising?

Ever come across advertisements alongside Google search results or other search engine result pages? Then you’re already kind of familiar with pay-per-click or simply PPC advertising.

PPC is a paid online advertising model where advertisers pay each time a user clicks on one of their ads. Also known as the cost-per-click (CPC) model, Pay-Per-Click advertising is essentially a method of ‘buying’ visits to your site, in addition to your organic traffic, and one of the best ways to attract visitors online.

Key Benefits of PPC Advertising

The PPC model is a win-win situation as it offers unique advantages to both advertisers and publishers. From a publisher’s perspective, the pay-per-click form of advertising provides a primary revenue stream – it allows digital giants like Google and Facebook to monetize the free products they offer, like free web browsing and social networking.

The PPC model allows advertisers to get their products or services in front of a highly-targeted audience searching for related content fast –  you can get direct traffic and get on top of the SERP within hours of launching a keyword-optimized PPC campaign. PPC can also indirectly boost your Search engine optimization (SEO ) and help you rank even with low domain ratings (DR); plus, the dreaded algorithm changes have little to no effect on PPC ads.

However, one of the most compelling benefits of PPC advertising is its unique feature of paying only when a user clicks on your ad. The fact that you don’t have to waste your budget on people not interested in your offer and that you can choose to spend as much or as little as you like makes PPC one of the most cost-effective paid advertising methods today.

How Does Pay-Per-Click Advertising Work?

PPC is all about relevance and reaching the right audience at the right time. PPC advertising works its magic through Ad Auction – a bidding system Google and other search engines use to determine the relevance (Ad rank) and validity of advertisements that will appear in their SERPs, while advertisers bid on the perceived value of a click in relation to the keywords, platforms, and audience type in which it originates.

Advertisers bid on key terms they want to “trigger” or display their ads, better known as keywords. By bidding on popular keywords relevant to what you’re advertising, you’re basically paying for targeted traffic to your website (or app) – they tell search engines which terms or search queries you want your ad to be displayed alongside in SERPs. Investing in highly relevant keywords results in more clicks and, consequently, more profits.

How Much Does PPC Cost? Pay-Per-Click Pricing Models

The beauty of PPC advertising is that you pay for existing clicks instead of crossing your fingers and hoping your marketing tactic steals the show. However, the average cost of PPC marketing varies depending on several factors.

From the publisher’s perspective, the cost-per-click (CPC) depends on the website’s quality and click-through rate (CTR), coverage of the platform, and relevance to the offered promotional materials. For advertisers, rates depend on the type of advertisement, ad position on the website, the competitiveness of the sector/industry, and the amount of booked advertising.

Pay-per-click advertising rates are usually determined using one of the two following pricing models:

  1.Flat-rate model

In the flat-rate pay-per-click model, advertisers pay the publisher a fixed amount for each ad click. Publishers usually have a list of established PPC rates that apply to different keywords and areas of their websites based on the level of competition. Luckily, they are often open to negotiations.

  2.Bid-based model

In the bid-based model, publishers run a real-time auction whenever a visitor clicks on an ad or, in other words, triggers the ad spot. Advertisers bid a maximum cost (amount of money) they are willing to pay for that advertising spot.

The publisher then uses automated tools to determine the “winner” by taking numerous ranking factors into account, like the expected clickthrough rate, ad relevancy, landing page quality, and the Quality Score of your ads and websites, not just the amount of money offered.  

The question of much you should pay for PPC advertising will depend on your unique digital marketing and PPC strategy, budget, and ultimate goals.

Different Types of PPC Ads

PPC ads come in a plethora of shapes and sizes – they can be displayed in the form of text, image, video, or a sassy, creative combination of all the above. They can also appear on different channels – from search engines and websites to social media platforms, and the list goes on. The options are many, and the choice is all yours.

Pay-per-click ads can be broken down into several leading ad types or ad categories most advertisers use:

  1. Search Ads

Search engine advertising (also known as search engine marketing (SEM) or simply paid search) is one of the most popular and favored types of PPC advertising campaigns. You’ve probably seen PPC search ads in SERPs – the advertisements above organic search results with the ‘Ad’ message in the corner. Search ads appear in SERPs for search terms (keywords) related to the product or service advertised.

Since we regularly search for products, services, and information on search networks, we know our target audience is doing the same. So, advertising on major search engines is hands down one of the best ways to position your business at the forefront and generate qualified leads without breaking the bank. Most advertisers use Google Ads to market on Google. Another option is using Microsoft Advertising to advertise on Bing.

  2. Display Ads

Display ads, also known as banners, are image or text ads that appear on different websites, selected to target particular audiences and link to your website. Display advertising differs from search advertising in that your ad appears in front of users who have indicated that they may be interested in your product or service.

Although notorious, banner ads are actually highly customizable, responsive, and cost-effective. Display ads usually do have a lower click-through and conversion rate than PPC search ads, but they also have lower click prices and can come in very handy for building brand awareness. When optimized and targeted at the right audience, display advertising is still one of the best paid online advertising strategies for brand awareness, customer acquisition, and increasing ROI.

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  3. Social Media Ads

Besides Google Ads, social networks are the most popular platforms for PPC advertising. Advertising on social media has become an audience gold mine since social media platforms, such as Facebook, Twitter, Instagram, and LinkedIn, have sky-high numbers of users that can be highly targeted and converted into potential customers.

If socially connecting with customers is your preferred marketing method, social media advertising might be the ideal choice, as paid social ads are great for increasing brand awareness and targeting audiences with specific demographics and interests. Getting the right imagery and targeting is crucial with social advertising – you want the right people to see your ad, and you want them to be interested enough to click on it.

 4. Retargeting PPC Ads (Remarketing Ads)

Ad retargeting is a great way to increase brand awareness, engagement, and conversion rate and reduce cart abandonment. Retargeting ads get displayed to visitors who have previously interacted with your ads or website but didn’t convert – make a purchase, fill in a contact form, etc.

With remarketing ads, you’re continuously engaging active users who have shown interest in your brand, product, or service, so they don’t slip away, pushing them down the sales funnel by encouraging them to complete the buyer’s journey. Many online advertising platforms allow you to retarget people with ads based on different criteria and even merge platforms. For example, get a visitor to your website with a Google Ad, then retarget them on Facebook with Facebook Ads.

  5. Shopping Ads

A Shopping campaign might be the perfect fit if you have an eCommerce website. Google Shopping Ads (also referred to as Product Listing Ads) appear on search engines just like in a search campaign (often in a carousel). However, they contain a preview of the product or service being sold – the price, title, and description of the product.

Basically an online shop window, shopping ads provide your audience with a sneak peek at your products before you’ve paid for the click, improving their chances of converting, thus, usually returning a higher conversion rate than a Search campaign.

  6. Gmail Sponsored Ads

With PPC, you can reach interested leads in a lot of different places than one. With unique Gmail sponsored promotions featured by the Google Ad’s experience, you can land at the top of your target audience’s inboxes. 

These ads appear like any other email, except for the “ad” tag on the email and the bolded subject line, and allow targeting users based on their interests. You’re charged for each time your ad is clicked on but not for any actions beyond “opening the email.”

Which PPC Campaign Is the Best?

In the end, choosing the sharpest tool, or shall we say PPC advertisement in the shed, boils down to what type of PPC campaign will work best for your business and marketing goals. 

Whether you value fixed cost over ad exposure, desire a highly-targeted social campaign or one that highlights your small business in the surrounding community, or want to build your brand identity instead of receiving an immediate boost in sales, all play an important role in helping you choose the perfect PPC campaign for your business.

How to Calculate Your PPC Budget and Performance? Key Formulas for Understanding Your PPC Data

Marketing is both a science and art. Creativity helps you steal your prospects’ and customers’ attention, hearts, and minds. Science, however, is the data backbone necessary for making intelligent advertising decisions.

To understand how PPC can work for you, tapping into campaign metrics is everything – they allow you to access the true value of your PPC marketing efforts and craft the most effective campaigns. 

Cost Per Click (CPC)

Total Cost / Number of Clicks will tell you the exact cost of every click (CPC), while the Cost per mille (CPM) will tell you the cost for a thousand ad impressions. Another thing to keep an eye on is your Click-Through Rate (CTR), which tells you how many people are seeing your ad (each view is an impression) versus how many people click on it. You can calculate it using the Number of Clicks / Number of Impressions x 100 formula.

Return On Investment (ROI)

Although CPC and CTR are key metrics to look at, return on investment is even more important as it isn’t just concerned with the cost but also what you’re getting out of your PPC campaign. It offers valuable insights into which campaigns are performing best – bringing in leads, driving conversions, and increasing sales. You can calculate your ROI using the following formula: Revenue Generated – Cost of Campaign / Cost of Campaign x 100.

Another crucial piece of data related to ROI is conversion rate – conversion tracking tells you about the effectiveness of your PPC efforts and how many sales your campaign is generating. You can calculate it using the Number of Conversions / Number of Clicks x 100 formula. Although conversions often refer to sales, they can apply to any action you’re trying to get prospects to engage in, like filling out a contact form or signing up.

Cost per acquisition (CPA) is a more in-depth version of the cost per click calculation because it tells you the cost of each conversion you achieved: PPC Campaign Cost / Number of Conversions.

What Are You Waiting for? Go Paid, Go PPC!

PPC, one of today’s most popular forms of online advertising, just might be the boost your digital marketing strategy needs to cut through all the online noise, help you stay ahead of the curve, and gain a significant competitive edge, at least in the SERPs. 

In the end, nobody counts the number of ads you run – they just remember the impression you make. So, choose and craft your winning PPC advertising methods and strategies wisely. Need a helping hand? Our PPC experts are armed and ready to help you pave your way to digital heights with paid advertising.