Pay Per Click - Explained
What is Pay Per Click?
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Table of ContentsWhat is Pay per Click (PPC)?How is Pay Per Click Used?Purpose Construction Flat-rate PPC Bid-based PPC Academic Research on Pay per Click (PPC)
What is Pay per Click (PPC)?
An internet advertising model that aims to bring traffic to websites is commonly known as PPC (Pay per Click). Its other name is CPC (Cost Per Click). When someone clicks on the ad, the advertiser makes payment to the publisher who can be the owner of a website or network of sites. It is a technique to buy visits to a website. These visits are not the results of organic traffic. Its most popular form is Search Engine Advertising.
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How is Pay Per Click Used?
PPC is commonly linked with 1st-tier search engines, for example, MS Bing Ads and Google Adwords. The marketers place a bid on the keyword phrases, related to the target market. Whereas content websites generally charge a specific fixed price on every click instead of using a bidding system. Certain advertisements are shown by PPC, we call them banner ads. These are displayed on websites around the related content which agree to display ads. It is not a Pay per Click advertising. Facebook and Twitter-like social media sites also use PPC advertising model. Sites can offer PPC advertisements. They show an ad when a keyword query contains the same results as they are in the keywords list of the advertiser added in various advertisement groups or when a content website shows related content. These are known as Sponsored Ads or Sponsored links. They appear on the result page of a search engine below or above the organic results or maybe anywhere the website developer selects on a content website. The model of Pay per Click is criticized because of click frauds. Though search engines, including Google, have designed automated systems to protect against competitors abusive clicks who may be the corrupt developer.
There is a concept of Cost per Impression (CPI) and Cost Per Order (CPO). Their purpose is to analyse the profitability of online marketing and cost-effectiveness. The PPC is beneficial than CPI because it provides information on how effective the marketing is. Clicks actually measure interest and attention. If an ad is just to get clicks, means its purpose is to drive traffic to a specific website, then PPC is preferable. Once, a specific no. of web impressions are obtained successfully, the ad placement and quality will have an effect on the Click Through Rates.
To calculate PPC, divide the advertising cost by the no. of clicks produced by an ad. The formula becomes Pay per Click (USD) = Advertising Cost (USD) / Number of Clicked ads (#). 2 primary models are used to determine PPC, i. e. Flat Rate, Biased Rate. In both situations, the advertiser has to bring the potential click value into consideration from a provided source. This value depends on the type of a user or visitor, the advertiser expects to visit the target website. And also, what can the advertiser get from his visit in the form of short-term and long-term revenue. There are many other ways and factors of advertising in which targeting or targets interests are utmost important (a search term defines it mostly, i.e. the keywords we use to enter as a query in the search engine or a page content that we browse, intention to buy or not, tracking location (comes under the head of geo-targeting), day, time of browsing, etc.
Flat Rate Pay Per Click is a model which states that the advertiser and the publisher of the ad agree on a fixed payment against every click. Most of the times, the publisher keeps a rate card with him that lists PPC in a distinct website or network areas. These payments are mostly relevant to the pages content, which typically attracts more users and has a higher Pay Per Click as compared to the content that attracts lesser users. However, mostly, the advertisers or the marketers decide lower rates, particularly when they commit to a value contract (more value or long term). This model is specifically common for comparison shopping engines that generally publish rate cards. However, such rates are least, sometimes. The advertisers can make more payment for greater visibility. These websites are typically compartmentalised neatly into the categories of goods or services. This allows advertisers to do the highest targeting. In most of the situations, the whole main content of such websites is paid advertisements.
There is a contract signed by the advertiser to compete with other advertisers on the basis of a private bid or auction that a publisher hosts or generally an Advertising network. This is said to be Bid-Based Pay per Click. For a given advertisement spot (mostly on the basis of a keyword), each of the advertisers tell the host about the highest amount he wants to pay. For this, they use online tools. Whenever a user triggers the advertisement spot, the auction performs in an automated manner. Advertisers make payment for every click they get, with the real amount paid on the basis of bid amount. It is common in auction hosts that they charge the winner of the bid a bit more, for example, 1 penny as compared to the next bidder of the maximum amount or the real amount bid, whatsoever is lower. This avoids cases where bidders constantly manage their bids you minor amounts to observe if they are still able to win the bid by making payment of just a bit less/click. The advertisers can deploy automated bid control systems in order to achieve scale and get maximum success. They can directly use them, although advertising agencies offering a Pay per Click bid management service generally use them. Such tools normally manage bids at scale with 1000s or even millions Pay per Click bids that a fairly high automated system controls. The system commonly sets every bid on the basis of an objective that is set for it, for example, maximize traffic and profit, achieve the targeted visitors at break even and so on. It is generally tied to the website of the advertiser and fed the outcomes of every click that then enables it to manage bids. These systems effectiveness directly relates to the quantity and quality of performance information they work with. Low traffic advertisements may cause scarcity of data issue provides several bid management tools inefficient at the best level and useless at the worst level.