Pay-per-click (PPC) is an
internet
The Internet (or internet) is the global system of interconnected computer networks that uses the Internet protocol suite (TCP/IP) to communicate between networks and devices. It is a '' network of networks'' that consists of private, pub ...
advertising
Advertising is the practice and techniques employed to bring attention to a product or service. Advertising aims to put a product or service in the spotlight in hopes of drawing it attention from consumers. It is typically used to promote a ...
model used to drive traffic to websites, in which an advertiser pays a publisher (typically a
search engine
A search engine is a software system designed to carry out web searches. They search the World Wide Web in a systematic way for particular information specified in a textual web search query. The search results are generally presented in a ...
, website owner, or a network of websites) when the ad is clicked.
Pay-per-click is usually associated with first-tier search engines (such as
Google Ads
Google Ads (formerly Google AdWords) is an online advertising platform developed by Google, where advertisers bid to display brief advertisements, service offerings, product listings, or videos to web users. It can place ads both in the result ...
,
Amazon
Amazon most often refers to:
* Amazons, a tribe of female warriors in Greek mythology
* Amazon rainforest, a rainforest covering most of the Amazon basin
* Amazon River, in South America
* Amazon (company), an American multinational technology c ...
Advertising, and
Microsoft Advertising
Microsoft Advertising (formerly Bing Ads, Microsoft adCenter and MSN adCenter) is a service that provides pay per click advertising on the Bing, Yahoo!, and DuckDuckGo search engines. In 2021, Microsoft Advertising surpassed US$10 billion in annua ...
formerly Bing Ads). With search engines, advertisers typically bid on
keyword phrases relevant to their target market and pay when ads (text-based search ads or shopping ads that are a combination of images and text) are clicked. In contrast, content sites commonly charge a fixed price per click rather than use a bidding system. PPC display advertisements, also known as banner ads, are shown on web sites with related content that have agreed to show ads and are typically not pay-per-click advertising, but instead usually charge on a cost per thousand impressions (
CPM CPM may refer to:
Advertising
*Cost per mille, the advertising cost per thousand views
*Cost per impression, Cost per thousand impressions, the online advertising equivalent
Management
*Certified practising marketer, a qualification for Australi ...
). Social networks such as
Facebook
Facebook is an online social media and social networking service owned by American company Meta Platforms. Founded in 2004 by Mark Zuckerberg with fellow Harvard College students and roommates Eduardo Saverin, Andrew McCollum, Dustin M ...
,
Instagram
Instagram is a photo and video sharing social networking service owned by American company Meta Platforms. The app allows users to upload media that can be edited with filters and organized by hashtags and geographical tagging. Posts can ...
,
LinkedIn
LinkedIn () is an American business and employment-oriented online service that operates via websites and mobile apps. Launched on May 5, 2003, the platform is primarily used for professional networking and career development, and allows job se ...
,
Reddit
Reddit (; stylized in all lowercase as reddit) is an American social news aggregation, content rating, and discussion website. Registered users (commonly referred to as "Redditors") submit content to the site such as links, text posts, images ...
,
Pinterest
Pinterest is an American image sharing and social media service designed to enable saving and discovery of information (specifically "ideas") on the internet using images, and on a smaller scale, animated GIFs and videos, in the form of pinboard ...
,
TikTok
TikTok, known in China as Douyin (), is a short-form video hosting service owned by the Chinese company ByteDance. It hosts user-submitted videos, which can range in duration from 15 seconds to 10 minutes.
TikTok is an international version ...
, and
Twitter
Twitter is an online social media and social networking service owned and operated by American company Twitter, Inc., on which users post and interact with 280-character-long messages known as "tweets". Registered users can post, like, and ...
have also adopted pay-per-click as one of their advertising models. The amount advertisers pay depends on the publisher and is usually driven by two major factors: quality of the ad, and the maximum bid the advertiser is willing to pay per click measured against its competitors' bids. In general, the higher the quality of the ad, the lower the cost per click is charged and vice versa.
However, websites can offer PPC ads. Websites that utilize PPC ads will display an advertisement when a query (keyword or phrase) matches an advertiser's keyword list that has been added in different ad groups, or when a content site displays relevant content. Such advertisements are called ''sponsored links'' or ''sponsored ads'', and appear adjacent to, above, or beneath
organic results on search engine results pages (
SERP), or anywhere a web developer chooses on a content site.
["Customers Now", David Szetela, 2009.]
The PPC advertising model is open to abuse through
click fraud
Click, Klick and Klik may refer to:
Airlines
* Click Airways, a UAE airline
* Clickair, a Spanish airline
* MexicanaClick, a Mexican airline
Art, entertainment, and media Fictional characters
* Klick (fictional species), an alien race in the g ...
, although Google and others have implemented automated systems to guard against abusive clicks by competitors or corrupt
web developer
A web developer is a programmer who develops World Wide Web applications using a client–server model. The applications typically use HTML, CSS, and JavaScript in the client, and any general-purpose programming language in the server. is used f ...
s.
Purpose
Pay-per-click, along with
cost per impression
Cost per impression (CPI) and cost per thousand impressions (CPM) are terms used in traditional advertising media selection, as well as online advertising and marketing related to web traffic. They refer to the cost of traditional advertising or ...
(CPM) and
cost per order
Cost per order, also called cost per purchase, is the cost of internet advertising divided by the number of orders. Cost per order, along with cost per impression and cost per click, is the starting point for assessing the effectiveness of a compan ...
, are used to assess the cost-effectiveness and profitability of internet marketing and drive the cost of running advertisement campaign as low as possible while retaining set goals. In Cost Per Thousand Impressions (CPM), the advertiser only pays for every 1000 impressions of the ad. Pay-per-click (PPC) has an advantage over cost per impression in that it conveys information about how effective the advertising was. Clicks are a way to measure attention and interest. If the main purpose of an ad is to generate a click, or more specifically drive traffic to a destination, then pay-per-click is the preferred metric. The quality and placement of the advertisement will affect
click through rate
Click-through rate (CTR) is the ratio of users who click on a specific link to the number of total users who view a page, email, or advertisement. It is commonly used to measure the success of an online advertising campaign for a particular we ...
s and the resulting total pay-per-click cost.
Construction
Cost-per-click (CPC) is calculated by dividing the advertising cost by the number of clicks generated by an advertisement. The basic formula is:
:Cost-per-click ($) = Advertising cost ($) / Ads clicked (#)
There are two primary models for determining pay-per-click: flat-rate and bid-based. In both cases, the advertiser must consider the potential value of a click from a given source. This value is based on the type of individual the advertiser is expecting to receive as a visitor to their website, and what the advertiser can gain from that visit, which is usually short-term or long-term revenue. As with other forms of advertising, targeting is key, and factors that often play into PPC campaigns include the target's interest (often defined by a search term they have entered into a search engine or the content of a page that they are browsing), intent (e.g., to purchase or not), location (for
geo targeting
In geomarketing and internet marketing, geotargeting is the method of delivering different content to visitors based on their geolocation. This includes country, region/state, city, metro code/ zip code, organization, IP address, ISP, or other cri ...
), device used (e.g. whether the user is searching from a desktop device or mobile) and the day and time that they are browsing.
Flat-rate PPC
In the flat-rate model, the advertiser and publisher agree upon a fixed amount that will be paid for each click. In many cases, the publisher has a rate card that lists the pay-per-click (PPC) within different areas of their website or network. These various amounts are often related to the content on pages, with content that generally attracts more valuable visitors having a higher cost per click than content that attracts less valuable visitors. However, in many cases, advertisers can negotiate lower rates, especially when committing to a long-term or high-value contract.
The flat-rate model is particularly common to
comparison shopping engines, which typically publish rate cards. However, these rates are sometimes minimal, and advertisers can pay more for greater visibility. These sites are usually neatly compartmentalized into product or service categories, allowing a high degree of targeting by advertisers. In many cases, the entire core content of these sites is paid ads.
Bid-based PPC
The advertiser signs a contract that allows them to compete against other advertisers in a private auction hosted by a publisher or, more commonly, an
advertising network
An online advertising network or ad network is a company that connects advertisers to websites that want to host advertisements. The key function of an ad network is an aggregation of ad supply from publishers and matching it with advertiser's d ...
. Each advertiser informs the host of the maximum amount that he or she is willing to pay for a given ad spot (often based on a
keyword
Keyword may refer to:
Computing
* Keyword (Internet search), a word or phrase typically used by bloggers or online content creator to rank a web page on a particular topic
* Index term, a term used as a keyword to documents in an information syst ...
), usually using online tools to do so. The auction plays out in an automated fashion every time a visitor triggers the ad spot.
When the ad spot is part of a search engine results page (
SERP), the automated auction takes place whenever a search for the keyword that is being bid upon occurs. All bids for the keyword that target the searcher's Geo-location, the day and time of the search, etc. are then compared and the winner determined. All this happens in real time, therefore this is called
real-time-bidding or RTB, and in a fraction of a second. In situations where there are multiple ad spots, a common occurrence on SERPs, there can be multiple winners whose positions on the page are influenced by the amount each has bid and the quality of their ad. The bid and
Quality Score
Quality Score is a metric used by Google, Yahoo! (called ''Quality Index''), Facebook (called Ad Quality) and Bing that influences the ad rank and cost per click (CPC) of ads.
To determine the position of the ad on a search engine, each ad is al ...
are used to give each advertiser's advert an ad rank. The ad with the highest ad rank shows up first. The predominant three match types for both Google and Bing are Broad, Exact and Phrase Match. Google Ads and Bing Ads also offer the Broad Match Modifier type (although Google retired it in July 2021) which differs from broad match in that the keyword must contain the actual keyword terms in any order and doesn't include relevant variations of the terms.
In addition to ad spots on SERPs, the major advertising networks allow for contextual ads to be placed on the properties of 3rd-parties with whom they have partnered. These publishers sign up to host ads on behalf of the network. In return, they receive a portion of the ad revenue that the network generates, which can be anywhere from 50% to over 80% of the gross revenue paid by advertisers. These properties are often referred to as a ''content network'' and the ads on them as ''
contextual ads'' because the ad spots are associated with keywords based on the context of the page on which they are found. In general, ads on content networks have a much lower
click-through rate
Click-through rate (CTR) is the ratio of users who click on a specific link to the number of total users who view a page, email, or advertisement. It is commonly used to measure the success of an online advertising campaign for a particular we ...
(CTR) and
conversion rate
In electronic commerce, conversion marketing is marketing with the intention of increasing ''conversions—''that is, site visitors who are paying customers.
Measures
Conversion marketing attempts to solve low online conversions through optim ...
(CR) than ads found on SERPs and consequently are less highly valued. Content network properties can include websites, newsletters, and e-mails.
Advertisers pay for every single click they receive, with the actual amount paid based on the amount of bid. It is common practice amongst auction hosts to charge a winning bidder just slightly more (e.g. one penny) than the next highest bidder or the actual amount bid, whichever is lower. This avoids situations where bidders are constantly adjusting their bids by very small amounts to see if they can still win the auction while paying just a little bit less per click.
In order to maximize success and achieve scale, automated bid management systems can be deployed. These systems can be used directly by the advertiser, though they are more commonly used by advertising agencies that offer PPC bid management as a service. These tools generally allow for bid management at scale, with thousands or even millions of PPC bids controlled by a highly automated system. The system generally sets each bid based on the goal that has been set for it, such as maximize profit, maximize traffic, get the very targeted customer at break even, and so forth. The system is usually tied into the advertiser's website and fed the results of each click, which then allows it to set bids. The effectiveness of these systems is directly related to the quality and quantity of the performance data that they have to work with — low-traffic ads can lead to a scarcity of data problem that renders many bid management tools useless at worst, or inefficient at best.
As a rule, the contextual advertising system (Google Ads, Yandex.Direct, etc.) uses an auction approach as the advertising payment system.
History
There are several sites that claim to be the first PPC model on the web, with many appearing in the mid-1990s. For example, in 1996, the first known and documented version of a PPC was included in a web directory called Planet Oasis. This was a desktop application featuring links to informational and commercial websites, and it was developed by Ark Interface II, a division of
Packard Bell
Packard Bell is a Dutch-registered computer manufacturing brand and subsidiary of Acer. Originally an American radio set manufacturer, Packard Bell Corporation, it was founded by Herbert A. Bell and Leon S. Packard in 1933. In 1986, Israeli in ...
NEC Computers. The initial reactions from commercial companies to Ark Interface II's "pay-per-visit" model were skeptical, however. By the end of 1997, over 400 major brands were paying between $.005 to $.25 per click plus a placement fee.
In February 1998 Jeffrey Brewer of
Goto.com, a 25-employee
startup company
A startup or start-up is a company or project undertaken by an entrepreneur to seek, develop, and validate a scalable business model. While entrepreneurship refers to all new businesses, including self-employment and businesses that never intend t ...
(later Overture, now part of
Yahoo!
Yahoo! (, styled yahoo''!'' in its logo) is an American web services provider. It is headquartered in Sunnyvale, California and operated by the namesake company Yahoo Inc., which is 90% owned by investment funds managed by Apollo Global Man ...
), presented a pay per click search engine proof-of-concept to the
TED
TED may refer to:
Economics and finance
* TED spread between U.S. Treasuries and Eurodollar
Education
* ''Türk Eğitim Derneği'', the Turkish Education Association
** TED Ankara College Foundation Schools, Turkey
** Transvaal Education Depa ...
conference in
California
California is a U.S. state, state in the Western United States, located along the West Coast of the United States, Pacific Coast. With nearly 39.2million residents across a total area of approximately , it is the List of states and territori ...
. This presentation and the events that followed created the PPC advertising system. Credit for the concept of the PPC model is generally given to
Idealab Idealab (formerly known as idealab!) is a startup studio based in Pasadena, California, U.S.A.
History
Idealab was founded by Bill T. Gross (not to be confused with the founder of PIMCO, Bill H. Gross) in March 1996. Prior to Idealab, Gross founde ...
and
Goto.com founder
Bill Gross.
Google
Google LLC () is an American multinational technology company focusing on search engine technology, online advertising, cloud computing, computer software, quantum computing, e-commerce, artificial intelligence, and consumer electronics. ...
started search engine advertising in December 1999. It was not until October 2000 that the
AdWords
Google Ads (formerly Google AdWords) is an online advertising platform developed by Google, where advertisers bid to display brief advertisements, service offerings, product listings, or videos to web users. It can place ads both in the result ...
system was introduced, allowing advertisers to create text ads for placement on the Google search engine. However, PPC was only introduced in 2002; until then, advertisements were charged at
cost-per-thousand impressions or
Cost per mille
Cost per mille (CPM), also called cost per thousand (CPT) (in Latin, French and Italian, ''mille'' means ''one thousand''), is a commonly-used measurement in advertising. It is the cost an advertiser pays for one thousand views or impressions of ...
(CPM). Overture has filed a patent infringement lawsuit against Google, saying the rival search service overstepped its bounds with its ad-placement tools.
Although GoTo.com started PPC in 1998,
Yahoo!
Yahoo! (, styled yahoo''!'' in its logo) is an American web services provider. It is headquartered in Sunnyvale, California and operated by the namesake company Yahoo Inc., which is 90% owned by investment funds managed by Apollo Global Man ...
did not start syndicating GoTo.com (later Overture) advertisers until November 2001. Prior to this, Yahoo's primary source of SERPs advertising included contextual IAB advertising units (mainly 468x60 display ads). When the syndication contract with Yahoo! was up for renewal in July 2003, Yahoo! announced intent to acquire Overture for $1.63 billion. Today, companies such as
adMarketplace
adMarketplace is a search advertising marketplace. The privately held company is headquartered in New York City.
adMarketplace introduced an algorithmic bidding solution, BidSmart, for their search advertising platform in early 2014.
Search ad ...
,
ValueClick
Bread Financial Holdings, Inc. is an American publicly traded provider of loyalty and marketing services, such as private label credit cards, coalition loyalty programs, and direct marketing, derived from the capture and analysis of transaction- ...
and adknowledge offer PPC services, as an alternative to AdWords and AdCenter. Similarly Google provides pay per click services, this was pioneered in APAC by Tim Schaare-Weeks.
Among PPC providers, Google Ads (formerly Google AdWords),
Microsoft adCenter
Microsoft Advertising (formerly Bing Ads, Microsoft adCenter and MSN adCenter) is a service that provides pay per click advertising on the Bing, Yahoo!, and DuckDuckGo search engines. In 2021, Microsoft Advertising surpassed US$10 billion in annual ...
and
Yahoo! Search Marketing
Yahoo! Native (formerly known as Yahoo! Advertising, Yahoo! Search Marketing and Yahoo! Gemini) is a native "Pay per click" Internet advertising service provided by Yahoo!, Yahoo.
Yahoo began offering this service after acquiring Overture Servic ...
had been the three largest network operators, all three operating under a bid-based model.
For example, in the year 2014, PPC(Adwords) or online advertising attributed approximately US$45 billion of the total US$66 billion of Google's annual revenue In 2010, Yahoo and
Microsoft
Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washing ...
launched their combined effort against Google, and Microsoft's
Bing
Bing most often refers to:
* Bing Crosby (1903–1977), American singer
* Microsoft Bing, a web search engine
Bing may also refer to:
Food and drink
* Bing (bread), a Chinese flatbread
* Bing (soft drink), a UK brand
* Bing cherry, a varie ...
began to be the search engine that Yahoo used to provide its search results. Since they joined forces, their PPC platform was renamed AdCenter. Their combined network of third party sites that allow AdCenter ads to populate banner and text ads on their site is called BingAds.
PPC Statistics
* Customers are 50% more likely to purchase something after clicking a paid ad.
* SMEs spend $108,000 to $120,000 annually on PPC ads.
* 57.5% of users don't recognize paid ads when they see them.
*Click Bots and Fake Traffic Cost Online Advertisers $35 Billion
Legal
In 2012, Google was initially ruled to have engaged in misleading and deceptive conduct by the
Australian Competition & Consumer Commission
The Australian Competition and Consumer Commission (ACCC) is the chief competition regulator of the Government of Australia, located within the Department of the Treasury. It was established in 1995 with the amalgamation of the Australian Tra ...
(ACCC) in possibly the first legal case of its kind. The ACCC ruled that Google was responsible for the content of its sponsored AdWords ads that had shown links to a car sales website
Carsales
carsales.com Ltd is an ASX 100 business in digital marketplaces across Oceania, Asia and The Americas.
carsales was recognised by Forbes as one of the most innovative growth companies in 2017.
History
carsales.com Ltd (carsales) was founded b ...
. The ads had been shown by Google in response to a search for
Honda Australia
Honda Australia Pty Ltd, commonly known as Honda Australia, is an Australian wholly owned subsidiary of Honda based in Moonee Ponds, Victoria, Australia.
The Honda brand arrived in Australia in the mid 1950s, when independent firms imported Hon ...
. The ACCC said the ads were deceptive, as they suggested Carsales was connected to the Honda company. The ruling was later overturned when Google appealed to the
High Court of Australia
The High Court of Australia is Australia's apex court. It exercises Original jurisdiction, original and appellate jurisdiction on matters specified within Constitution of Australia, Australia's Constitution.
The High Court was established fol ...
. Google was found not liable for the misleading advertisements run through AdWords despite the fact that the ads were served up by Google and created using the company's tools.
See also
*
Advertising
Advertising is the practice and techniques employed to bring attention to a product or service. Advertising aims to put a product or service in the spotlight in hopes of drawing it attention from consumers. It is typically used to promote a ...
*
Automated bid managers
Automated bid managers (ABMs) are advertising tools used to manage budgets on pay per click
Pay-per-click (PPC) is an internet advertising model used to drive traffic to websites, in which an advertiser pays a publisher (typically a search engi ...
*
Clickthrough rate
Click-through rate (CTR) is the ratio of users who click on a specific link to the number of total users who view a page, email, or advertisement. It is commonly used to measure the success of an online advertising campaign for a particular web ...
*
Digital marketing
Digital marketing is the component of marketing that uses the Internet and online based digital technologies such as desktop computers, mobile phones and other digital media and platforms to promote products and services. Its development duri ...
*
Opportunity to see
*
Pay-per-call advertising Pay-per-call (PPCall, also called cost-per-call) is an advertising model which allows companies to advertise on TV and literally pay for each call generated from each TV commercial aired based on a performance model and agreed upon cost per call. Th ...
*
Pay to click
Paid to click (PTC) is an online business model that draws online traffic from people aiming to earn money from home. PTC websites act as middlemen between advertisers and consumers; the advertiser pays for displaying ads on the PTC website, and a ...
*
Search engine marketing
Search engine marketing (SEM) is a form of Internet marketing that involves the promotion of websites by increasing their visibility in search engine results pages (SERPs) primarily through paid advertising. SEM may incorporate search engine opti ...
*
Search engine optimization
Search engine optimization (SEO) is the process of improving the quality and quantity of Web traffic, website traffic to a website or a web page from web search engine, search engines. SEO targets unpaid traffic (known as "natural" or "Organ ...
References
{{DEFAULTSORT:Pay Per Click
Compensation methods
Pricing
Online advertising methods
Internet terminology
Contexts for auctions