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How does pay per click advertising work and what are the advantages?

How does PPC work and what are the advantages?

Although you might have heard of it, you may still be wondering – how does pay per click work?

Pay per click advertising is a method of digital advertising where an advertiser pays a publisher a fixed amount every time an online user clicks on the advert. A publisher can be a website owner or a network of websites.

The main purpose of a pay per click campaign is to purchase visits for a website, thereby driving traffic to the site.

Additionally, through driving traffic to the site, the goal is to encourage a call to action such as making a purchase or signing up for a newsletter for example.

Pay per click advertising (PPC)

PPC is a popular choice for online marketing campaigns. However, there are other models which can be used. Although these methods are slightly similar, they must not be confused with the PPC model.

  • PPA – Payment for acquisition. This is where the advertiser pays the publisher an amount for every time the online user carries out a specific action, such as downloading an app or making a purchase.
  • PPM – Payment per thousand. The advertiser pays the publisher a fixed amount for every time the advert is shown a thousand times to online users.
  • Pay per click concepts
  • Cost per click – The cost per click (CPC) is the amount paid by the advertiser for each and every click. This amount can be determined through an auction, or the publisher and the advertiser can mutually agree on a fixed amount.
  • Click through rate – The click through rate (CTR) refers to the total percentage of online users who view the advert and actually click on it. Logic demands that a good quality advertisement will generate a much higher CTR. Some PPC systems use the CTR to determine the price of an advert. This is because these systems reward a good quality advert and, in turn, a higher click through rate.
  • Segmentation – One of the greatest benefits of online marketing is that we are able to reach the exact audience we are targeting. We are able to segment the online users who will see our PPC campaigns according to very specific demographics. These include location, interests, behaviours, gender and age, to name a few. Due to the different options offered by PPC platforms, we can achieve a level of accuracy which will ensure that we only pay for clicks from users who are likely to become paying customers.
  • Impressions – An impression is defined as the advert which appears on the page when someone visits the website. Each visit to the website on which the advert is displayed is counted as an impression. This means the visitor sees the ad but does not actually click on it.
  • Conversion – A conversion refers to an actual purchase made after an online user clicks on and advert. This is easily the most important metric in any pay per click advertising campaign as it shows how well the advert is performing. The conversion ratio refers to the percentage of users who converted to customers, compared to the total number of users who clicked on the advert.
  • Landing page – This is the site to which the user is directed once clicking on an advert. A good quality landing page which is search engine optimised will encourage the user to stay for longer, which may result in them converting. Simplicity, clarity and relevance with respect to the advert are all characteristics of a well optimised landing page.
  • Frequency – Frequency refers to the number of times an advert is shown to the same user within a specific time frame. We use frequency to make sure that users are positively impacted by the advert. However, excess targeting of a unique user can result in the user feeling spammed and rejecting the campaign entirely.

10 Advantages of pay per click advertising

  1. Only target audiences are reached by the adverts. Segmentation options allow us the opportunity to make sure that no click is wasted. This is because we make sure that only online users who are interested in the product will see the ad. Because the audience being targeted are more likely to click, the result is a higher percentage of clicks and the cost of the advert ultimately decreases.
  2. PPC works hand in hand with SEO. This is because the opportunities for traffic and impressions are most often targeting the same audience. This audience refers to the people who use Google to find products, services and information. The data provided by PPC campaigns can provide valuable insight on a keyword-by-keyword basis for exactly where SEO efforts must be prioritised and improved.
  3. Better visibility and positioning. By using PPC, you are able to show your adverts on the sites most visited by online users. These sites include social networks and search engines.
  4. PPC campaigns are easily measured. PPC platforms offer information on the advert such as the number of clicks, impressions, conversions and the CTR.
  5. PPC contributes directly to your business goals. PPC yields powerful results with regards to aligning website traffic drivers with end goals. Whether your goal is thought leadership, lead generation, e-commerce sale or high-level brand exposure, PPC campaigns can help you achieve them.
  6. Optimisation possibilities – This gathered information helps the advertiser establish how well the advert is performing, allowing the opportunity improve the PPC strategy where necessary.
  7. You only pay for the visits. With PPC, there is a direct link between cost and performance. In other words, you do not pay any fees for the display of the advert as you would in other methods of advertising. These advertising models cannot guarantee that they are generating any results, regardless of how much you pay for them.
  8. Your budget is controllable. PPC allows you to allocate a maximum daily budget for each campaign which means your campaigns can be adapted to the relative advertisers. You have full control over how much you are willing to spend on each campaign.
  9. You control when and where your adverts will be displayed. You can choose which platform and location interest you the most and some sites even allow you to select exactly which day and what time your ad will show.
  10. You can compete even if you have just started up. By using PPC, you have the opportunity to gain an edge on your competition. This applies to a brand new website as well an existing website that isn’t ranking well. PPC allows you to effectively promote your company while competing against existing companies for new customers.

Where is pay per click advertising used?

PPC is not a specific location or site; it’s a payment model. Therefore, you have the following options when deciding where you wish to advertise.

PPC adverts on social networks

Advertising tools on social media platforms such as Instagram and Facebook allow PPC options which are accurately segmented based upon the user’s profile information. These adverts can be displayed in their newsfeed or in a side column.

PPC adverts on display

PPC can be used when displaying banner adverts on websites which are relative to the brand’s services, products or the interests of its audience. Although when properly implemented, these campaigns can be effective, CTR’s are often smaller than in other adverts. Therefore, a much larger target audience is required.

PPC adverts on search engines

Search engine advertising offers you the opportunity to display adverts to online users based on the specific keyword they used when searching. These adverts are highly visible because they appear on the first page of the search engine results page. Furthermore, it’s highly effective because these ads are aimed at users who are looking to fulfil a specific need.

ITM – Website design, SEO, Digital Marketing

We are a highly skilled and experienced team of digital marketers and online wizards. For more information on how pay per click advertising can benefit your business, feel free to contact us.

ITM provides a comprehensive list of online services which will significantly improve your ranking.

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