What is PPC?
Pay Per Click follows a simple display advertising model whereby a business's ads (text links, banners etc) appear on a search engine search results page (such as Google's where they appear above and to the right of organic search results) and other partner websites (which have chosen to host ads). Every time an ad is clicked, the business pays the ad-server (eg Google) a fixed amount (eg 15 cents), and Google passes on a percentage of this (approx 20%) to the partner website.
How are ads targeted?
PPC ads are highly targeted. We can compare the new process of matching ads to content and customers to the old methods.
If a poster for a sci-fi movie is placed on the side of a bus or a road side billboard, it will be exposed to a wide audience, but only some of them will be interested in sci-fi films. Place the same ad in a sci-fi magazine, and you have a much greater chance of building a buzz and getting people to some see it.
PPC ads are many times more sophisticated than this. Ads can be tailored and targeted by leveraging 2 important bits of information ..
- the search terms (keywords and phrases) that an end visitor types into a search engine
- the website browsing and purchasing history of a visitor (recorded either in an ad-server network or individual website cookie)
It's important to emphasise that ad serving is dynamic and that a visitor may see a different ad, or different version of an ad, within seconds of their browsing history being updated. Therefore, a visitor who is browsing classical guitars at an online retail site, but leaves before buying, may see ads appearing for guitars on other unrelated sites within seconds.
SEM (search engine marketing) ads
Because Google dominates the PPC market, PPC is often called Search Engine Marketing. Google's PPC service (AdWords) is predicated on its search directory and the records it keeps of the search and browsing history of visitors.
SEM - Search result page ads
These ads appear next to organic search result links on a search result page. On Google these are above and to the right of organic search result links.
The ads that appear depend on whether the search terms a visitor has entered match the keyword and keyword phrases selected by the business to trigger the ad. This makes the ads relevant.
It is important that businesses do not choose keywords and phrases that result in irrelevant ads appearing. So if you searched on "Darth Vader", Google does not want ads for car insurance to appear.
Therefore Google ensures that ads and their business are relevant to searches by filtering ads with an algorithm.
Also, it is important for a business that visitors do not click on their ads if their products and services are not want the visitor is looking for. If they do click, the business still has to pay even though the visitor immediately leaves.
SEM - Third party (partner) website ads
When a business creates a Google AdWord campaign it can choose to have its ads appear on Google's search result page and on the websites of Google's partners via Google's ad-server network.
Google's algorithm tries to match the ad to the content on the partner's website page, and to the visitors browsing history, to ensure ads are as relevant and targeted as possible.
Often ads appear that aren't relevant to the content, but target more products and services from a retail site the visitor has recently visited or purchased something from.
Google partner (AdSense)
A website owner (or YouTube channel owner) can choose to have ads accompany their content in return for a cut of the PPC income. Such a website is called a Google partner, and they create a so called Google AdSense account where they can control what sort of ads appear (text or image etc), and where on their website pages.
The ad below and to the right are appearing because we are a Google AdSense partner (to help cover our hosting costs). Does it relate to this page or your recent browsing history?
Non SEM ad-server networks
There are other ad-server networks, not allied with search engines, that host and serve display ads (banners etc) to partner websites. These ads are targeted and tailored by profiling the content of partner websites, and using the information recorded in cookies which are retrieved from a visitors browser cache stored on their internet device.
They differ from SEM / PPC ads in that they are not utilising search.
How much does the business pay?
When a business starts a PPC campaign, either with Google or another ad-server network, they must decide where their ads will appear and how much they are prepared to pay for each click.
If they want their ads to appear in search results, then Google, Yahoo and Bing are the logical choices. If they don't want their ads to appear in search results, they must choose another ad-server network.
Non SEM ad-server network
This will depend on the ad-server, how they charge for ads, and if they operate a bidding system (see below).
SEM ads
As the dominant search engine results and ad-server network advertising service it is useful to understand how Google charges.
For each ad, the amount that is paid per click, and the exact position in search results, depends on a number of factors. Google does not publish exactly how it ranks ads or organic search results, but it is likely that these factors are the most important ..
Search results position
To ensure their ad appears above their competitors a business must ..
- pay the most for each click
- have exact, or better matches for their chosen keyword and keyword phrases than their competitors
- have website content that is relevant to the search terms
Cost of each click
A business is only charged when an ad is clicked on, not when it appears. The cost of each click depends on how much they business has bid for the keyword / keyword phrases it is targeting (competitors may be using.
Essentially, keyword and keyword phrases are the subject of an auctioning process. A business can make a bid, but if they are out-bid by a competitor, their ad will not be ranked as highly or at all.