What is pay per click in advertising? (Types and steps)

By Indeed Editorial Team

Published 6 July 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Digital advertising is a key component of most businesses today, and pay-per-click (PPC) is one of the most popular forms of it. Businesses use PPC advertising campaigns as a cost-effective way to reach a large audience on the Internet. It's important for marketers to understand the basics of PPC advertising and how to implement it to create successful campaigns. In this article, we discuss what PPC advertising is, how to create a successful campaign and highlight other important information about PPC.

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What is pay-per-click advertising?

Pay-per-click is a dynamic form of advertising where the advertiser pays a fee every time a user clicks or interacts with their advertisement. For example, brands may use PPC to generate traffic to a webpage, gain exposure for a brand, convert visitors to shoppers or acquire new customers.

Pay-per-click advertising started as a simple way for businesses to gain exposure by being first on search engine results, but Web 2.0, social media and the spread of online shopping changed PPC drastically. Today, consumers can see large-scale video campaigns similar to traditional TV advertisements, influencing them to click on a website or act digitally. Many advertising agencies are shifting their focus from traditional marketing methods, such as billboards, and investing their resources in digital forms instead.

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Types of PPC advertising

There are various forms of PPC advertising, all with different traits and uses. Here are a few of them:

Paid search advertising

While there are many forms of PPC advertising, paid search advertising is the most common. After users type a keyword into a search engine, a brand's advertisement shows up as one of the top results on the page disguised as an organic search result. Because the result can be one of the first choices depending on how much the company bids for its spot, users are more likely to click on it than a low-rank result.

Display advertising

Display advertising is another type of PPC that has been on the Internet for quite some time. This form of advertising is when websites allocate space on their pages for images or video banners that businesses can purchase to advertise their products or services. This form of advertising is the same as traditional billboard ads, but it's in a digital medium. Display advertising may not be the most effective for a high click-through rate but can generate brand awareness if done correctly. For successful display PPC campaigns, advertisers consider which websites their target audience visits and imagery that entices them.

Social media advertising

Advertisers have studied social media advertising for years to create successful campaigns, and many aspects of this form of advertising aren't applicable elsewhere. Social media advertising is effective because a brand can communicate directly with its audience, gaining a large follower base to inform of special events or offers. Advertisers can use social media PPC for many purposes, such as gaining followers, generating exposure to posts, encouraging users to click on links and convincing social media users to purchase products.

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Remarketing advertising

Brands use cookies to collect information about users and understand their behaviour, habits and interests, among other aspects of their consumer lives. They use cookies to show customers related products or brands that may interest them. For example, if you put a product into your shopping cart on a website, a cookie stored on your computer notes that you left the website without purchasing it. You may then receive advertisements for the same product to entice you to purchase it, or you may receive product recommendations for similar products.

Affiliate advertising

Some brands may have an affiliate programme where individuals can partner with the brand to drive sales, receiving a percentage of all purchases in return. Brands may have a dedicated webpage for their affiliates that acts as a portal and includes all marketing materials, such as logos and promotional resources. Affiliate marketing has become increasingly common on social media platforms with the rise of influencers and their far reach. One of the main components of affiliate marketing is that it encourages the advertising to look organic and genuine from a consumer's perspective.

How to create a successful PPC campaign for a business

Brands may incorporate multiple forms of PPC advertising in their digital campaigns, or they may opt to focus on a single type of PPC advertising instead. Many large corporations also combine digital PPC advertising with more traditional forms of advertising, such as billboards, newspaper ads, radio ads or TV spots. Here is a step-by-step guide to help you create successful PPC campaigns:

1. Keyword research

Before you begin tweaking the settings of your PPC campaign, it's essential that you perform adequate research on keywords. Researching keywords can show you the search traffic for a word or phrase and help you understand whether there is a big enough market for promoting a product and generating a profit. Long-tail keywords are longer phrases that don't attract as much traffic but have a higher chance of converting users to customers due to their specific nature.

Brainstorming keywords and performing keyword research is an intensive exercise that requires creativity and diligence. For example, if a company is selling vacuum cleaners, the obvious keywords to consider would be 'vacuum cleaner' or 'vacuuming cleaning', but phrases such as 'household dust' or even a long-tail keyword like 'how can I get rid of dust?' provide plenty of opportunities for the brand. Once you've created a list of short and long-tail keywords, you can use digital tools to evaluate the search traffic and see how many people show interest in the topic.

2. Create a marketing budget

Digital campaigns can be pricey if you don't set strict boundaries and expectations. Since PPC advertisements operate on a 'pay later' basis, where brands pay for each action, a campaign with unlimited parameters can reach hundreds of thousands or even millions of pounds. You can experiment with ads on a smaller scale and then apply that data to your larger campaigns. You can calculate your cost per click (CPC) by using the following formula:

Average cost per customer x (1 - [profit margin]) x [conversion rate] = maximum CPC

A key aspect to PPC is testing what keywords, variables or budgets work to create a successful, effective campaign. You can acquire the variables in the formula above by creating test campaigns. A company's niche market affects how much each user click costs. For example, if you're advertising for an insurance firm, each click may cost £5 due to it being a very niche and conversion-heavy industry. If the cost of one £5 click nets you a £500 conversion, then you can adjust your budget and increase or decrease it accordingly.

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3. Use unique landing pages

Having customers click on an advertisement is just half the task. To ensure their interest is maintained enough for them to browse your company's website and products, you need a quality landing page for them to arrive on once they've clicked on the ad. There is a subtle balance between having a cluttered web page with information overload and one that doesn't have enough information to intrigue and convert a visitor. Keep the landing page relevant to the visitor's interests with an attractive aesthetic and convincing copy for the best results.

'The fold' in digital marketing refers to the cut-off line on a user's computer screen. Information 'above the fold' loads on a user's screen as soon as they arrive on the web page. It is beneficial to include the most eye-catching and important information above the fold on your landing page, enticing visitors to read more about the brand and its products or services.

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4. Place bids on your keyword

Placing bids on your keyword is the last step in creating a successful PPC campaign. If you outbid competitors, you ensure that you place your advertisements in a priority queue. Once the campaign begins, you can start to track metrics. There are many factors to consider when placing bids, including what platform you want your advertisements to appear on, their priority, what social media platforms you're currently advertising on and your target demographic. Understanding these factors can help you control your budget and lead to a successful and efficient PPC campaign.

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