PPC (Pay Per Click): What Is It & How Does It Work?

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For most small businesses, hiring a marketing team may seem out of reach. Luckily, there’s never been a better time to create a digital marketing plan on your own. This is where PPC comes in.

PPC is short for "pay per click," and it’s one of the most popular strategies in the world of search engine marketing and social media marketing. In fact, advertisers dump more than $10 billion a year into the practice. Have you ever seen sponsored posts on Instagram or Twitter or the links at the top of a Google results page that are highlighted in pink? These are all PPC ads.

There’s a lot that goes into crafting the perfect and most effective PPC ad, but luckily, you can start small and learn through experimentation.

TL;DR (Too Long; Didn't Read)

PPC, or pay-per-click advertising, is a type of digital, keyword-driven marketing strategy where advertisers are charged a fee based on user actions like clicks, views and engagement with the ad.

What Is PPC?

At the heart of it, PPC means you’re essentially paying for web traffic rather than paying a flat fee for a banner or print ad and hoping for traffic and sales.

It works like this: An advertiser will create content for a PPC ad network, like Google Ads or Microsoft Ads, and the network will show the advertisement to relevant users, charging a fee each time an action is taken on the ad. Typically, advertisers pay when users click a link that goes to their website, but on social platforms, advertisers may pay per impression, video view and/or on-site engagement (think: a follow or a like).

This is the most basic definition of PPC marketing, as there’s a lot that goes into the actual process, from the auction and keyword research to meticulously amplifying the factors that push your ad to the top of search engine results pages, also known as SERP.

Why Use PPC Advertising?

Organic traffic is essential to the long-term success of a web-based company, and companies that have enacted a search engine optimization strategy may get plenty of it. Still, even with the best SEO, many small businesses struggle to get to the top of SERPs, which always favors massive companies like Macy’s or Walmart. This is where PPC advertising comes in.

Small businesses will likely never rank as high organically as they do with PPC ads, and that type of exposure can be extremely worth the investment. Think of it this way: If you pay $3 a click, that may seem like a lot, but what if that click led to a $300 sale that you wouldn’t have gotten otherwise? The goals of PPC are generally to:

  • Increase sales

  • Generate leads

  • Promote brand awareness

On average, PPC is pretty effective. About 65% of clicks are made by potential customers who are indeed looking to make a purchase. With Google Ads in particular, brands can expect to make about $2 for every $1 spent.

Who Does PPC Advertising?

To get started with PPC marketing, you’ll need to get an account with an ad network. The top PPC networks include:

  • Google Ads: Formerly known as Google AdWords, Google Ads is the largest PPC network in the world. It runs ad campaigns on its display network sites (think sidebar ads) and search partner sites, which includes YouTube, and marketers have access to Google Analytics, which is essential to an effective SEO strategy.

  • Microsoft Advertising: Formerly known as Bing Ads, this platform shows ads across Microsoft and Yahoo’s networks as well as various search partners. Like Google Ads, Microsoft Advertising has a series of ad extensions that make ads more effective and better looking. This includes call extensions, which adds a phone number to the advertisement during business hours.

  • Facebook Ads: This includes Instagram Ads. It's a great option because ad blockers are generally ineffective, and the campaigns have extensive targeting options.

  • Twitter Ads: This is similar to Facebook ads. You’ve likely seen this as “sponsored” tweets in your Twitter newsfeed. Like Facebook, it also has real-time analytics.

  • LinkedIn Ads: LinkedIn Ads is considered the most effective platform for B2B lead generation. Display ads are placed across its website and products, including InMail. This is a great option for B2B businesses.

  • Amazon PPC: This is also known as "sponsored products." Amazon sellers can use this to make their listings sponsored products on search pages. Amazon Ads have a nearly 10% conversion rate, which is way more than the average e-commerce conversion rate of 1.33%.

  • Verizon Media Native: Verizon absorbed Yahoo’s popular Yahoo! Search Marketing. This spreads out ads across Verizon-owned websites like TechCrunch, AOL, Tumblr, Yahoo! and the Huffington Post.

Generally, well-rounded PPC campaigns include a mix of search marketing and social media marketing.

How Does PPC Work?

The way PPC works depends on the ad network, but they’re all relatively the same. Nearly all PPC platforms require advertisers to bid on the amount that they’re willing to pay for a single action. This is the CPC, or cost per click, and the amount bid affects the ad’s placement. For example, a custom footwear company may put an enormous bid on the keyword “custom sneakers” and land an ad placement at the top of a SERP, while other businesses with smaller ad spends may not.

Money is a huge factor, but it’s also not the only way that ads get pushed to the top. Social platforms like Facebook Ads and Instagram Ads place sponsored ads in front of users based on things like relevance to predetermined interests and engagement. If you look on the back end of your own Facebook account, you can see that the social network has already labeled you with a list of curated interests they use during this process.

PPC vs. SEO

In the world of digital marketing, SEO and PPC are two huge drivers of web traffic. Some people approach this as an either/or situation, but ideally, brands should have a well-rounded marketing strategy that includes both. Research has shown that PPC is most effective when it’s used with SEO. SEO is a long-term strategy, but PPC is for short-term growth.

  • PPC is immediate: While it may take weeks or months for an SEO strategy to start seeing results, PPC puts you in the top search engine results within a day.

  • There’s a greater conversion rate: People who visit a brand’s website via PPC marketing are about 50% more likely to make a purchase than people who visit a website organically (i.e., through good SEO).

  • Consumers are none the wiser: Most consumers cannot tell the difference between paid ads and other content.

  • You can more easily measure success: It’s difficult to measure SEO’s return on investment, but PPC’s ROI is totally up front and is sometimes clearly laid out in back-end tools like Facebook or Google Analytics.

Optimizing Your PPC Campaign

Optimizing your PPC campaign largely depends on the ad network, but they all look at similar factors. To get a feel, look at Google, which has one of the most extensive algorithms. It chooses ad rank by:

  • Keyword relevance: This includes having relevant PPC keyword lists, proper ad copy and razor-sharp ad groups.

  • Quality score: All Google Ad accounts get a quality score that rates the overall quality of the keywords, landing pages and PPC campaigns of the advertiser. Advertisers who have higher-quality scores get a better CPC.

  • Landing page quality: Landing pages with full SEO that have relevant information and a call to action and that are tailored to specific search queries rank highest.

  • Creativity: Ad copy is important because Google doesn’t want to annoy its users. Plus, this is the thing that people see when your ad is approved and makes them want to actually click on your ad. Make sure your headline draws in people and that your description text gives users enough information. You can test multiple versions to see which does best. Many ad platforms allow for a/b testing.

If this is done correctly, you'll receive the most-possible clicks at the lowest price. Ad networks often penalize advertisers with higher fees if their product and landing page is not very relevant to the keywords they have chosen. Cohesiveness is key across the board.

Choosing the Right Keywords

Keywords are often seen as the bread and butter of PPC marketing. This requires extensive research, and you’ll want to look at Google Analytics (to see which keywords are driving users to your site) and Google Trends (to see which keywords are growing in popularity in your region and the world). The most effective keyword list is:

  • Relevant: This leads to the highest click-through rate and the lowest cost.

  • Exhaustive: You should include popular search terms and frequently searched words in your specific niche along with less common and more specific keywords. The latter are more inexpensive and drive the most traffic.

  • Expansive: The world changes, and so do searches. You’ll have to constantly adapt your keyword list as your campaign runs and also from campaign to campaign.

Once you have your keywords, you'll want to put them into ad groups. These are themed subcategories that target similar search queries since people type phrases many different ways when they're searching the web for something. For example, an ad group for “women’s maxi dresses” may include the keyword variations “maxi dresses women” and “women’s maxi dresses sale”.

Along with this, you’ll also want to assign negative keywords to remove nonrelevant traffic that will create a higher CPC. For example, if you’re selling high-end products, you may want to filter out users who use the words “cheap,” “discount” or “budget”. Clearly, those people aren't looking for luxury goods.

Matching Your Keywords

After choosing your keywords, each keyword is assigned different match types, which defines how relevant the keyword is to search queries. These range from exact matches and phrase matches to broad matches and variations and misspellings of all of the above.

For example, an exact match for the keyword “cheap glasses” would obviously be “cheap glasses,” but a phrase match, which allows terms to come before and after, may be “cheap glasses prescription”. A broad match, where the keyword can work for similar searches, may be “cheap sunglasses”. Getting this right affects the ranking of your search ads and your CPC.

Choosing an Audience

There are numerous ways audiences are segmented, from page views and time spent on a site to search queries, interests and location. Marketers generally find the best value with remarketing, which is when you target advertisements to people who have already visited your website. With remarketing, you may want to bid more for searchers who abandoned items in their cart than those who simply viewed your home page. Always think of who is most likely to make a purchase when choosing an audience to target.

Defining a Budget

The aim of the game isn’t to get the highest click-through rates but the highest conversion rates. You want consumers to actually purchase an item, sign up for a mailing list or do the action your ad campaign intended. Still, a budget can feel limiting if you’re a small business, so always keep in mind the returns. For example, you may be able to spend $2 per click if the ad is pointing to a $200 item, but leads for intangible things require more thought.

You’ll need to examine the lifetime value of customers to really get a hold on what you should be spending. Always set your budget to be spent during certain days and hours in the locations that will make it most effective. You do not need to be running PPC ads at 4 a.m. on a Saturday morning when users are less likely to be willing to get out of bed and get their credit card information.

If you’re unsure about the process, test the waters with a small Facebook Ads campaign, which can cost less than $20, and go from there. Remember that the average Google Ads click costs around $2.69 for search ads and 63 cents for display ads, but it depends on the industry. If you're getting drastically different results, it's time to reevaluate your campaign, comb through your most costly keywords, refine your landing pages and try again.