PPC How Does Pay-Per-Click Advertising Work?

[dmitrinekol]

PPC as a marketing channel covers a number of different ad platforms, with the most common of these being Google Ads and Bing Ads.

And within each of these platforms are different ad formats, including:

• Search Ads
• Shopping Ads
• Display Ads
• Video Ads
• Gmail Ads

Most commonly, you will find that businesses start their PPC marketing on Google Ads, for the simple reason that it gives access to the largest audience of potential clients and customers, as well as a number of different ways to set up and run campaigns depending on your goals.

But regardless of the platform and ad format, the way that PPC works remains largely unchanged, and it is a pretty simple process:

1. Sign up to an advertising account with the platform.
2. Create ads (and select the right targeting by adding keywords or audiences, etc.).
3. Set the maximum cost you are willing to pay for each click.
4. Your ad goes into an auction with other advertisers who are bidding on the same keywords.
5. The auction determines the order in which the ads are shown.
6. You pay when someone clicks your ad.

It is fairly straightforward and easy to get to grips with, and while there are differences between different ad formats (and other bidding strategies that can be used, as an example), the main principles remain.

But let's take a look at how the auction works, as this is often the part that's the most confusing to those getting started with PPC.

How do PPC ad auctions work?​

When a user performs a search, an ad auction takes place that is used to determine factors including:

• An ad account's eligibility to enter the auction.
• The order in which eligible ads will appear in the ad space on the results pages.
• How much a click will cost each of the advertisers whose ads are showing.

The first influencer on the auction here is the maximum CPC (cost-per-click) that an advertiser sets in their ad account either for a specific keyword or ad group — this is the most that they are willing to pay for each click.

But it doesn't necessarily mean that this is how much they will actually pay, just the maximum.

The other influencer is the Quality Score (QS), a metric that consists of a number of different factors such as the expected CTR (click-through rate) of an ad, the relevancy of an ad to the query being searched for, and the experience of the landing page that the ad will send traffic to.

We will dive deeper into Quality Score shortly.

The position of an ad on the results page is determined by the Ad Rank, which can be defined in simple terms as:

Ad Rank = Quality Score x Max CPC

Google's actual formula is a little more complex, but to gain a general understanding, this is a brilliant way to look at it.

What determines how much an advertiser pays for a click?

Ad Rank plays a big part in this but isn't the only contributing factor to CPC. We can understand the cost that an advertiser pays to appear in their position as:

Cost Per Click = Ad Rank of the advertiser below / Quality Score + $0.01

 

[Setho]

There are various kind of advertising techniques and that includes pay-per-click advertising . in this form of advertising the advertising network is only going to charge you a fee when the person or the people that you are advertising to click your link. This link is normally to a landing page or a sign-up page.