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Pay-Per-Click Advertising: What Is PPC & How Does It Work?

If you have ever noticed the advertisements that appear alongside search results on Google and other search engines, you are already familiar with pay-per-click, or PPC advertising.


What Is Pay-Per-Click Advertising?

PPC is an online advertising model in which advertisers pay each time a user clicks on one of their online ads.


There are different types of PPC ads, but one of the most common types is the paid search ad. These ads appear when people search for things online using a search engine like Google – especially when they are performing commercial searches, meaning that they're looking for something to buy. This could be anything from a mobile search (someone looking for "pizza near me" on their phone) to a local service search (someone looking for a dentist or a plumber in their area) to someone shopping for a gift ("Mother's Day flowers") or a high-end item like enterprise software. All of these searches trigger pay-per-click ads.


In pay-per-click advertising, businesses running ads are only charged when a user actually clicks on their ad, hence the name “pay-per-click.”


Other forms of PPC advertising include display advertising (typically, serving banner ads) and remarketing.


How Does Pay-Per-Click Advertising Work?

In order for ads to appear alongside the results on a search engine (commonly referred to as a Search Engine Results Page, or SERP), advertisers cannot simply pay more to ensure that their ads appear more prominently than their competitor’s ads. Instead, ads are subject to what is known as the Ad Auction, an entirely automated process that Google and other major search engines use to determine the relevance and validity of advertisements that appear on their SERPs.


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How Keywords Work in Pay-Per-Click Advertising

As its name implies, the Ad Auction is a bidding system. This means that advertisers must bid on the terms they want to “trigger,” or display, their ads. These terms are known as keywords.


Say, for example, that your business specializes in camping equipment. A user wanting to purchase a new tent, sleeping bag, or portable stove might enter the keyword “camping equipment” into a search engine to find retailers offering these items.


Pay per click advertising example SERP

At the moment the user submits their search query, the search engine performs the complex algorithmic calculations that the Ad Auction is based upon. This determines which ads are displayed, in which order, and by which advertiser.


Since you have to pay for each click on your ads, it's imperative to only bid on keywords that are relevant to your business, so you can be sure to get ROI from your ad spend. A keyword tool can help you find the right keywords to bid on that are both likely to drive sales or conversions and are not prohibitively expensive.

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