How Does Pay Per Click Work: The Definitive Guide for 2020

Brodie Schroeder

Did you know that the top 1 in the search results page has as much as 30% CTR? The click-through rate then falls to 10% when it gets to the website in the 3rd position. This is why websites are clamoring to get to the first position, not only on the first page.

How would you then get to the top? Most of the time, good old SEO can get you through it, but there’s another way; you can also get to your goals faster through pay-per-click marketing campaigns.

In this article, we’ll learn what is PPC and how does pay per click work. Read on to learn why this marketing strategy is right for your business.

What Is Pay Per Click (PPC) Advertising?

In PPC advertising, you don’t pay for an advertiser to put up your ad; you only pay for results. Setting up an ad campaign on Google Ads, for example, is free. Once you have your ad, Google will then display it on the top of the search results page (SERP) under relevant keywords.

It will be visible to all users, but you don’t have to pay a thing until someone clicks on it. Like the name suggests, the search engines get paid per click on the ad.

If you set up your PPC campaign the correct way, the fee you’ll be paying is trivial. The visit should be worth more than the click; for example, a click worth $3 might generate a sale of $100 on average.

Furthermore, Google might even charge you less for each click. Google likes targeted ads and landing pages that satisfy visitors. As a reward for creating relevant ads, the search engine will make you pay less, leading to more profits.

How Does Pay Per Click Work?

Because of the set-up of PPC, you don’t get to pay more for the search engine to display your ad more often than your competitors. You do have to participate in what they call the Ad Auction, though.

This is where you bid for keywords that you want to trigger your ads.

If you sell women’s sports clothing, for example, you would want to bid for keywords like “women jogging pants.”

When a user searches for a keyword, Google uses an algorithm to determine which ads to show and in what order. It takes into account 2 important things into its calculations: the max CPC and the Quality Score.

You first set a maximum bid you’re willing to pay; this is the max CPC (cost-per-click). You then bid for individual keywords or a group of related keywords.

The Quality Score, represented by 1 as the worst and 10 as the best, considers different factors. Google first looks at the expected CTR (click-through rate) of the ad. Then, it considers its relevance to the search query and the quality of the landing page.

If you score high on these things, you get a high Quality Score. In turn, you have a higher chance of appearing on the keywords you bid on.

The Quality Score also has an impact on the CPC, which is why the better your ad is, the less you pay per click. The formula that Google uses is as follows:

CPC = the Ad Rank of the advertiser in the spot below you / Quality Score + $0.01.

Why Your Business Needs to Use PPC

PPC seems simple enough, but what advantages does it offer to businesses that regular ads don’t have? Well, here are some of the best reasons to use PPC marketing:

1. To Increase Sales and Profit

In marketing, you have to keep an eye on the ROI to determine whether you’re making money from your ad campaign. If you’re spending more than the money that your ad is delivering, it means the ad isn’t working and you may need to scrap it.

With PPC advertising, though, it’s almost a guarantee that you would get a good ROI as long as you do it right. In fact, offers higher ROI than other forms of marketing as the potential sale from each click is high. Still, you do have to do some research in order to know which keywords to bid on.

The average CPC varies by industry; it can be as high as $6.75 for legal services or it can be as low as $1.15 for e-commerce. As a whole, though, the average CPC is at $2.69 for the Google Search Network and $0.63 for the Display Network.

All you have left to do is to make each of those dollars count by setting up a good landing page.

2. To Drive Traffic to Your Blog/Website

As we said earlier, the top websites in the SERP get the most of the clicks. Getting a PPC ad ensures you stay on top – within the first 3 spots before the actual results start. This gives you a higher chance to be visible; hence, more clicks and more traffic.

The results are almost immediate; you can get clicks within an hour of putting up your PPC campaign. What’s good about this is that the traffic is also consistent as long as your ads are live. If you have a budget, you can set up a daily budget so you don’t go over your limit.

Remember that traffic isn’t enough for your site, though, especially if you’re paying for that traffic. You have to make it count by converting that traffic into leads, for example, through getting their emails. Make sure they also get to interact further with your site to maximize the cost.

3. To Reach Your Target Market

PPC offers targeted marketing, so you can be sure you’ll only get clicks from the people who will likely convert. These are the people with genuine interest and immediate need for your product or service.

You don’t need to push your advertisement to people who already have an interest in your products. The traffic that PPC ads pull in are already looking for you, your products, and services.

This could be more effective than other forms of marketing, wherein you cast a net in an area and then pull the net in, hoping it caught a few who may turn into a customer. PPC is more akin to fishing with a pole; you’ll only get those who have interest in the worm in the first place.

To further ensure you’re only targeting the right people, you can limit your ad to certain locations. This is useful for local businesses who only operate within a limited area, such as in one city or state only. You can also set up a time window in which your ads will show.

4. To Test a New Market

PPC ads offer more than allowing you to reach your target market, though – it allows you to reach more people. It allows you to explore a new market for when you’re planning to expand your business by letting you test ads. You don’t have to splurge on other ads yet, you can test it on Google Ads first to get data on the new market.

You can check if your current ad will work on a new market or if you need to set up another one for this segment. You may also test different ads at once to see which one will perform better.

You’ll have to get the right combination of keywords, landing page, and meta descriptions. You won’t know this combination until you get to test it and see the results from an actual run.

5. To Set Up an Ad in an Instant

With other marketing strategies, you need to invest a lot of time and energy into setting up an ad. Of course, that doesn’t include the research phase, which is also a requirement when setting up a PPC campaign.

Then, you won’t also see the results of your campaigns right away. Even in digital marketing, it may take months or even years for you to see any significant change in the performance of your website, whether that’s on ranking or on conversion rate.

With a PPC ad, however, it’s easy to set up an ad, since all you need is a good landing page. The title and description are important, too, as these are the ones that will appear on the ad. These don’t take as long as a regular marketing campaign, though.

6. It Gives You Valuable Data

One of the biggest benefits of a PPC is that it provides data that’s easy to track through Google Ads. You can get valuable information like impressions, clicks, then conversions. The results are easy to see, letting you know in an instant whether it’s working or not.

You can further make use of the data by taking it into account when creating other PPC ads and your other ads. It can even help you understand your customer habits a bit better. For example, if you are making sales at certain times, you can then adjust the times when your ad will be showing to maximize the CPC.

Many advertisers also create different versions of the ads and landing pages. Then, based on the data they get, they’re able to see which strategies are working.

7. It Allows Easy Changes on Your Ads

PPC ads and its results are real-time, and you can make adjustments any time you like. If it’s not performing as expected, you can change some things in an instant and then publish it again. If you see a mistake, such as a misspelled word, it doesn’t take long to correct it.

This is different from other forms on advertisements; mishaps on billboards, for instance, are hard to fix. It will take a long time to take it down, print the new ad, and then put it up again. You would not be then maximizing the money you spent on the ad.

If it’s not getting you results, you don’t get to cancel it at once and then try with another ad that might work better. Your only choice would be to accept the loss, but with PPC ads, you can make changes as you see fit.

8. To Increase Brand Awareness

Even if people don’t click your ad, it will still form an impression on them. The more people who see your ads, the more people who’ll become aware of your brand.

Since your ads will be on top of the page quite often, they’ll become familiar with it as they see your brand more and more. Since you only pay per click, you won’t even have to pay for the exposure you’re getting.

With SEO, this can take months and then years before you see results in the form of conversions. As PPC ads are instant, however, you can see an increase in brand awareness in no time.

For this to work, you must improve your headline and meta-tag. It should spark the interest of the users by offering a proposition they’ll find to be valuable.

9. To Avoid the Risks Associated with SEO Updates

Google’s search algorithm is always changing. Too often, it drops updates that change the whole landscape of SEO. For this reason, SEO trends keep changing, and the strategy you’re using now might not even work next year.

PPC ad campaigns are immune to such changes, though, as it’s not dependent on Google’s algorithm. It doesn’t even take into account the level of optimization you’ve done on your website.

This means you won’t lose your rankings, and the money you’ve spent on PPC ads have already brought results. On SEO, you may spend thousands of dollars only to drop in the SERP due to an algorithm change.

You may have to keep an eye on how Google calculates your Quality Score, though. This is one thing that may have an effect on how often your ad appears and in what order.

How to Do Effective PPC Marketing

How does pay per click work?

Hopefully, with this guide, we’ve shown you the ropes but it’s not enough if you want to see positive results. We recommend contacting a pay per click marketing firm that has already done the research for you. You’ll only need to sit back and wait for the results.

Tell us your goals by contacting us today; let’s discuss how we can achieve those with PPC marketing.


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