What is Pay-Per-Click PPC and How Does It Work?

What is Pay-Per-Click PPC and How Does It Work?

Pay-per-click, known much more popularly as PPC, is a digital marketing channel used by businesses to drive traffic in their site and convert visitors into leads and customers.

But what exactly is PPC? And how can PPC help your business? How does PPC compare with SEO? These are just a few questions we’ll answer in this guide.

What is PPC?

PPC is an abbreviation that stands for pay-per-click. It’s a form of advertising where advertisers create and run ads on platforms and pay a pre-determined each time someone clicks on the ad.

Carry out a search with popular keywords and you’ll find PPC ads before organic search results, i.e. search results that aren’t ads.

From this search we can see two forms of PPC. At the top, are shopping ads that match for the selected keywords and has appeared because Google believes the search is for the intention of finding out more information about a product and perhaps purchasing it.

Below this features the standard PPC ads that display whether there’s an intention of buying a product or not – provided an advertiser has bid for those approximate or exact keywords.

Below this, are standard search results are standard search results achieved through search engine optimisation or SEO. You can find our guide about SEO here.

Businesses, small and massive corporations, use PPC to generate traffic to their site to try and convert them into customers or leads where they ask for a consultation of a more bespoke service or product.

What makes PPC particularly effective is that they can be targeted to people with very specific demographics.

For example, if you’re looking to target people who live in England who might be looking to buy an England shirt, this is easily done.

This isn’t possible with traditional forms of advertising media like television, radio, magazines and newspapers.

How Do PPC Ads Work?

Although PPC covers mainly search engines like Google and Bing, PPC really refers to a wide range of platforms that include:

  • Search advertisements
  • Shopping advertisements
  • Display advertisements
  • Video advertisements
  • Social media advertisements

A lot of businesses start in PPC ads by dipping their toes in Google Ads for the simple reason that it provides an excellent opportunity to access the largest number of potential customers. In addition, Google Ads give advertisers a wide array of tools that allow them to run campaigns in a way they that suits them, obtaining statistics that allows them to see if the campaign is cost-effective.

Given the popularity of PPC, it’s not like a magazine advertisement where it’s perhaps on a first come first served basis. Instead, the process works differently and can be simplified as follows:

  1. Advertiser creates an advert, including information on who and what keywords to focus on
  2. The advertiser sets their maximum bid for how much they’re willing to pay for some one clicking on the advert
  3. It the ad is goes into an auction with competition from other advertisers bidding for the same keywords
  4. The order of the adverts is determined by the auction
  5. Advertisers are charged if the search engine user clicks on the ad

This may sound a little daunting to start with. But we promise the process is easy to understand once you get going. The concept is the same for other forms of PPC ads too.

The Inner Workings of PPC Ad Auctions

Every time a user makes a search query, an auction takes place to decide placement of the ads. They two key factors are the maximum cost-per-click (CPC) and the quality score.

Maximum cost-per-click refers to the maximum cost of a click to advertisers – not how much they will actually pay.

Quality score on the other hand, is a factor that has a few sub factors. These include click-through-rates (CTR), how relevant they are to the end-user’s search query and Google’s view of the landing page the ad will send traffic to.

Therefore, it’s an important point that the landing page provides end-users with a good experience and not just about who pays the highest price. After all, if ads frequently lead to poor quality landing pages, we would all be less inclined to click on them in the future, risking Google’s bottom line.

Positioning of ads can be simplified down to a simple formula of:

Position = Quality Score x Max Cost-Per-Click

In reality of course, PPC formulas are a lot more complex, and the actual formulas are understandably trade secrets, but this provides a good point to start from.

The cost-per-click meanwhile, can also be simplified down to:

Cost-Per-Click = Position / Quality Score + £0.01.

Why Should I Use PPC?

PPC can be a great marketing channel for businesses, but it isn’t for everyone. You may find your website ranks perfectly well without needing to pay for ads or that your niche may be served better with ads in industry-specific magazines, for instance.

Measure and Track Your Advert’s Performance

One of the prime benefits of PPC over traditional advertising the in the ability to easily measure and track the returns of your investment. Popular platforms like Google Ads and Bing Ads allow you to see data on specific ad groups, keywords, the number of conversions, lead values and much more.

As a result, you can make changes to your campaigns or withdraw them entirely if you don’t feel they are working out. The data can also help inform you of data to adjust your marketing mix as part of your marketing strategy.

Increase Traffic to Your Website Quickly

Unlike SEO, which can take weeks and months to build, PPC ads can start appearing in usually no later than a few hours.

To protect their own brand images, ad platforms will usually need to approve your ads. After this, ads can start being served – as long as your bid is sufficient and there are enough people searching for the selected keywords.

It’s this speed which is what makes PPC so popular.

Target Specific Customers

PPC allows a great deal of control of who you can target. This helps to reduce wasting your advertising budget by targeting location, type of device being used and even the time of day.

It Puts You in Control

Sometimes businesses who use PPC ads are victims of their own success and can become swamped with interest and sales and can’t keep up with the demand.

PPC provide easy ways to pause ad campaigns and start them up again when sales drop, there’s a surplus of stock or when you need fresh leads.

It offers fluidity that doesn’t other marketing channels can’t match. You can decide on how much to spend per day, week, month or of course, per click.

What’s the Difference Between PPC and SEO?

Businesses will often have both PPC and SEO campaigns to help drive traffic to their website but are very different channels.

As already discussed, PPC means paying for a click, whereas SEO clicks are free. The main difference is time as it can take weeks and months to rank organically for content.

They shouldn’t be seen as competitors to one another but two factors of a digital marketing mix that can drive traffic to your site, resulting in increased revenue and profit for your business.

Find out more about SEO with our SEO guide to learn more.

Looking for PPC Help?

Although getting started with PPC campaigns is fairly simple, they can be difficult to master, especially with competition that exists.

XHost UK are a digital marketing and web design agency with years of experience with PPC and SEO campaigns. To see how we can help you, call us on +44 (0)203 740 8739, email [email protected] or use our contact form, and a member of our friendly team will be in contact with you as soon as possible.