What Is Pay-Per-Click Advertising?

Pay-per-click, or cost-per-click advertising, is a form of web site marketing which allows one to pay to have his or her site appear at the top of a search engine result page (SERP). Unlike natural or organic listings, which are ranked based on Search Engine Optimization (SEO) and appear at no additional cost, pay-per-click rankings are based on an open market bidding system. Bid prices range anywhere from $.01 to $100. The greatest benefit of pay-per-click advertising is that one pays only when a user actually clicks on an ad. Pay-per-click ranking is best thought of as a keyword auction, where the highest ranking in the sponsored links section is awarded to the highest bidder. Pay-per-click is appealing to businesses searching for an immediate solution to boosting search engine visibility. With some search engines such as Google, a pay-per-click ad can be up and running in as little as five minutes.

How do I set up a pay-per-click ad?

The first step is deciding how much to invest into a pay-per-click campaign. Prices per search engine and per keyword vary, and it is important that one keeps his or her budget in mind to ensure he or she is making decisions and setting goals most appropriate for the business. The next step is choosing a search engine. It is likely that one will receive much more traffic on search engine giants like Google Adwords and Yahoo! Search Marketing, but there are also lesser known search engines where one pays less for bids on popular keywords that will also provide good results. Selecting effective keywords and how much to bid on them is crucial to creating a valuable pay-per-click campaign. The goal is to choose keywords that will bring the most customers looking for the specific goods and services offered. This helps minimize costs and increase the conversion rate, the percentage of visitors who turn into sales. Many search engines offer tools that can help one make these decisions. These tools can tell how often a specific keyword is searched, suggest other related keywords, or estimate how much traffic will come from a particular bid. Pay-per-click allows for the creation of a personalized, usually text-only heading and description that will appear as the advertisement.

How does my pay-per-click account work?

When users perform a search on a keyword, the ad appears in a sponsored links section at the top or right hand side of the search engine result page. The top ranking generally goes to the highest bidder for a specific keyword. However, some search engines like Google also take other factors into account. The prominence of one’s site in this highly visible area of the results page increases site traffic. Generally, search engines only list the top ten sponsored links per page. The more popular the keyword, the higher one will likely have to pay to get his or her site up in the top rankings.

What does pay-per-click do for me?

Pay-per-click advertising increases traffic to a web site by providing one with the option to pay to have a site appear on a search engine results page. For a price, pay-per-click allows one to bypass Search Engine Optimization, and see results in a matter of minutes or a few days. With pay-per-click one pays only when a user clicks on the ad placed. The advertiser also decides how much he or she is willing to pay for the ad campaign, and set a daily maximum budget on the account.

What are the drawbacks to pay-per-click?

Ensuring that a pay-per-click ad maintains its value can be very time intensive. A good ad should be evaluated daily, or even multiple times a day, to ensure effective bidding on optimal keywords. The amount of time an advertiser puts into maintaining his or her ad may not be worth the opportunity cost of the time lost.

There is another type of search result called a natural or organic listing. These results are based on an advertiser’s Search Engine Optimization, and are free and also very effective. The length of time a website has been around is one factor in raising the Search Engine Optimization ranking, so a website gains value over time and receives a better rank just by being around. When a budget for pay-per-click runs out, a website is completely removed from the sponsored link market.

Is pay-per-click advertising worth my time and money?

This answer will vary for everyone. Key factors in determining worth are what one is trying to sell, the internet advertising budget, and the projected amount of business one anticipates receiving online. Conversion rates of 1% or lower are not uncommon. If business owner anticipates selling low volumes of a $5 product, dishing out $.10 each time a user clicks to the site is likely not going to be worth the time and money, and will probably result in debt, not profit. Whereas if one sells automobiles, the investment might be more practical given the payoff of one successful conversion. As with any financial business consideration, it is important to set realizable and appropriate goals for the business.

What is click fraud?

Click fraud refers to the abuse of a pay-per-click ad through unnecessary and ill-intentioned over-clicking. Click fraud occurs when a person or computer program imitates a natural user by continually clicking on a sponsored ad. These unnecessary clicks unfairly drive up the price a business must pay for the placement of their ad, and expedite the depletion of their advertising budget. Most cases of click fraud are performed by sponsors attempting to gain from clicks to their own ad, or by businesses attempting to shut competitors out of the advertising market.

- By Kristin Ige of Atak Interactive, Inc.