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

What Is Pay-Per-Click Advertising?

PPC is an online advertising model in which advertisers can display ads for their goods or services when users – people searching for things online – enter relevant queries into search engines. Advertisers are only charged when a user actually clicks on their ad, hence the name “pay-per-click.” Due to the nature of keywords and the role they play in paid search, pay-per-click advertising can also be referred to as keyword advertising.

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 the 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.

Pay-Per-Click Advertising: Keywords

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.

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.