Pay-Per-Click Advertising (PPC) is a well-established form of online marketing designed to drive targeted user traffic to the buyer’s website. In short, an advertiser pays a website publisher a specific fee for each legitimate visitor click that redirects to the advertiser’s predetermined destination.
Basically, as long as you search or view pages on other sites on search engines, you’ll see ads on those search results or pages. In many cases, advertisers won’t charge any fees unless the visitor actually clicks on the ad, so it’s called “pay per click”.
Google AdWords is currently the most famous PPC program, using the “display” advertising formula, but other search engine companies and affiliate networks also offer attractive PPC plans for merchants, entrepreneurs and start-ups who want to gain exposure or just make money.
PPC is a great way to measure the effectiveness of Internet marketing for your products and services, as clicks are the undisputed measure of performance evaluation. If the publisher provides valuable relevant content, the reader may notice your link or banner and have the motivation to click. Otherwise, it might be time to try another publisher or a new advertising strategy.
Pay-Per-Click Advertising Basics
The basic PPC formula is:
Pay-per-click ($) = Total Advertising Cost ($) ÷ Number of Ads clicked
In terms of cost, there are two ways to consider how to handle advertising strategies.
In some cases, you may have to pay a fixed amount to stay on the site for a fixed amount of time. For example, you can pay $100 for an ad to stay on the site for 30 days.
In this case, no matter how many people click on your ad, your fee will be $100. So if only one person clicks on your ad, your effective CPC is $100. But if 1,000 people click on your ad, the average cost per click is only $10. With a fixed advertising cost, your goal is to maximize the amount of clicks or click through rates (refer to below).
In other cases, you actually pay for each click, and the more clicks you get, the more you pay. In this case, you need to keep your ads more conservative to ensure that only high-quality potential customers click on your ads to minimize your costs and maximize your return.
Click Through Rate
Another interesting metric for marketers is click through rate (CTR), defined as the number of ad clicks (clicks) divided by the total number of impressions (number of occasions that your ad is shown on a publisher’s website):
Click through rate (%) = (Number of Click throughs/Total Number of Impressions) * 100%
For example, if 100 people see your ad and 10 people click on your ad, your click through rate will reach 10%.
Typical PPC activities achieve click-through rates between 1% and 4%, but the actual performance depends on the niche market you are in, the products or services that are actually sold, and many other factors. CTR is worth discussing in more detail, as is the concept of revenue per click. For most business people, this is the gold standard for online advertising effectiveness.
Measuring PPC Advertising Performance
How valuable is a click that comes to you from an indirect source? It all depends on the type of people your ad attracts and your PPC goals, such as:
– What will you gain from each visit? A new opt-in for a newsletter, a ‘Like’ or ‘share’, a lead, or an actual sale?
– Are the short-term and long-term goals of your PPC advertising campaigns met?
As for general prospects, your choice of keywords and/or the quality of ad placement by affiliate networks should follow from precise targeting criteria:
– What advertising is my ideal clicker interested in?
– Are you more sales motivated, or do you want to grow a “fan” base?
– Do you want clicks from clicker from a specific region (referring to geo-targeting)?
– When do you want to click into the ad (referring to time)?
Common Pay-Per-Click Advertising Model
Today PPC has two dominant models. Flat rate pay per click means that advertisers and web publishers agree to a fixed amount that will be paid for each click. Publishers typically have a rate card that allows different rates for different parts of the website based on content appeal or other criteria.
The second option, bid-based pay per click, is most closely associated with Google AdWords, Microsoft AdCenter (Bing), and other search engine companies. These networks run real-time auctions that determine the cost of ad clicks generated by keyword searches.
Pay-per-click advertising can help your company expand its customer base, increase your marketing reach to previously inaccessible audiences, and from a web publisher’s perspective, be an important source of revenue. In order to exploit this opportunity, seek out and research the various PPC options currently available and test them out to see what works best.
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