How Pay-Per-Click (PPC) Advertising Works

Last Updated on November 23, 2022

Businesses use pay-per-click (PPC) marketing as a digital channel to increase traffic and conversions from search engines.

Maybe you’re trying to figure out how to get your first customers and sales for a brand-new business or how to increase the internet visibility of your brand.

PPC can be a terrific way to market your company and attract new clients, but for those just starting with the channel, it can be a little complicated at first.

In this article, we’ll discuss different platforms and how they operate, as well as assist you to grasp what PPC is and how to use it to grow your business.

What is Pay-Per-Click (PPC)?

PPC, or pay-per-click, is a type of internet advertising where advertisers place ads on a platform like Google Ads and are charged each time a user clicks on them.

You may nearly always find advertisements at the top of the search results page on Google (or Bing).

PPC is used by businesses to attract their target market and increase traffic, sales, or inquiries. Common PPC platforms enable exceptional depth of targeting, allowing you to only deliver ads to people who you believe to meet your target audience.

The most popular method for individuals to find suppliers of goods and services is through search engines, and if there is a market actively looking for what your company has to offer, there is a chance to make a sale.

PPC gives you the chance to connect with your audience at a time when they are searching for a company like yours while also getting data insights that will help you over time increase the channel’s effectiveness.

Paid advertising is a significant industry, with estimates stating that Google alone generates more than $162 billion annually from its ad systems.

How the PPC Model Works

In the pay-per-click approach, keywords play a major role. For instance, online adverts (sometimes referred to as sponsored links) only show up in search engine results when a user types in a phrase associated with the good or service being offered. As a result, businesses that use pay-per-click advertising models investigate and assess the keywords that are most pertinent to their goods or services. Investing in appropriate keywords can lead to more clicks and, ultimately, more revenue.

PPC is thought to be advantageous for both advertisers and publications. The concept benefits marketers since it gives them a chance to market goods or services to a target market that is actively looking for related content.

The value of each visit (click) from a potential customer outweighs the cost of the click paid to a publisher, which enables an advertiser to save a significant amount of money with a well-designed PPC advertising campaign.

The pay-per-click business model offers publishers their main source of income. Consider the free services that Google and Facebook offer to their users (free web searches and social networking). Online advertising, especially the PPC model, allows online businesses to make money off of their free products.

Pay-Per-Click Models

1. Flat-rate model

A publisher receives a predetermined payment from an advertiser for each click in the flat rate pay-per-click model. Publishers typically maintain a list of various PPC rates that are applicable to various parts of their website. Keep in mind that publishers are frequently amenable to price discussions. If an advertiser offers a lengthy or valuable contract, a publisher is very inclined to reduce the set price.

2. Bid-based model

Each advertiser submits a bid using a maximum amount of money they are ready to pay for an advertisement spot in the bid-based model. The publisher then uses automated systems to conduct an auction. When a visitor activates the advertisement, an auction is launched.

Remember that the rank of the bids, not the overall amount of money being given, usually determines the auction’s winner. The ranking takes into account both the sum of money being offered and the calibre of the content being provided by an advertisement. As a result, the bid is just as significant as the content’s relevance.

Key Concepts to Understand About PPC

CPC or Cost Per Click

The cost per click, or CPC, is what the advertiser pays for each ad click. Here, you can choose to set a fixed fee per click or let an auction decide the price. In the latter scenario, the advertiser sets a bid, or the highest amount they will pay, for each click. The algorithm first displays the winning ad after comparing it to comparable ones depending on its quality and the price they are willing to pay.

CTR or Click-Through Rate

The click-through rate (CTR) measures the proportion of users who click on an advertisement out of all users who have seen it. In general, a better advertisement will have a greater CTR.

Given that the system promotes advertising with higher quality and, thus, larger CTRs, the CTR is sometimes used in PPC systems to determine the price of an advertisement.


Whether a person clicks on the advertisement or not, each view that it receives is referred to as a “impression.”


You have a tremendous degree of influence over the audience your online advertisements are aimed at. Based on variables like age, gender, region, interests, etc., you can divide the audience who will view your PPC advertisements into subgroups. You can combine the various choices that each pay-per-click platform offers to attain a high level of accuracy. By doing this, you can be sure that you are only paying for clicks from users who have a strong possibility of turning into your clients.


Conversion is likely the most crucial indicator in a PPC campaign because it allows you to assess the effectiveness of your advertisement from an economic standpoint. The phrase “conversion” describes each purchase a person makes after clicking on an advertisement. The conversion ratio is the proportion of users who clicked on the advertisement who ultimately become customers.

Landing Page

The webpage that a user is taken to after clicking on your advertisement is known as the landing page. Here, the user may decide to convert or depart after a little period of time. This indicates how crucial it is that the site is properly optimised. A good landing page should have three essential qualities: clarity, simplicity, and relevancy to the advertisement.


Frequency in this context refers to the number of times each ad is displayed to a particular user during a predetermined period of time. Divide the total number of impressions by the total number of unique users to determine frequency.

Users typically see an advertisement numerous times since doing so makes sure they are affected by it. Frequency does not, however, entail that you should saturate your target audience with advertisements, as this can result in rejection.

Why Businesses Use PPC Marketing

PPC is only one component of a multifaceted marketing plan. It’s uncommon for a company to rely solely on online advertising to drive traffic to its website. But it works well at accomplishing that. Many brands rely on it as a result to increase top-line sales.

Brands also choose it since it increases their chances of ranking well in search results. Businesses have the chance to run an ad that appears at the top of the results list when users search for a term on search engines like Google and Bing. Due to this, many businesses consider pay-per-click to be an SEO short cut.

Before you go…

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