Pay Per Click: How & Why

PPC is a digital marketing channel that typically business owners use to drive consistent traffic and conversions from search engines, most notably Google.

If you are looking for options to generate online traffic and sales for a new business or are considering ways to grow your brand’s presence online PPC is worth considering.

PPC enables business owners to market their business and reach new customers, but it can be a little confusing at first for those just getting started. In this guide, we will help you understand what PPC is, how it works, how you can use it to drive consistent high quality traffic for your business and explain different options, and how they work.

What is PPC?

PPC is an abbreviation for pay-per-click, is an online advertising model where advertisers run ads on a platform such as Google Ads and pay a fee every time someone clicks on it.

As you have probably experienced, if you search on Google (or Bing), and you will see ads displayed at the top of the results page.

Businesses use PPC to drive traffic, sales, or inquiries from their target audience. The Google Ads PPC platforms allows an in depth targeting, meaning that you can serve ads just for ideal customer. Search engines are the number one way that people look for suppliers of both products and services, and when there is an active audience looking for what your business offers, there is an opportunity to make a sale.

PPC can help you get in front of these people with a precise level of targeting that traditional advertising was never capable of. Want to target someone who lives in Sydney who is looking to buy a ‘New Phone Cover’? No a problem.

PPC offers the opportunity to reach an audience at a time when they are looking for a business like yours while gaining data insights to help you improve the efficiency of the ad campaign over time.

Paid advertising is big business, Google alone earns more than $162 billion per year through their ad platforms.

How Does Pay-Per-Click Advertising Work?

PPC as a digital marketing encompasses a variety of ad platforms, with the most common of these being Google Ads and Bing Ads. This guide is mainly focused around Google Ads.

Google Ads offer a number of ad formats, including:

  • Search Ads
  • Shopping Ads
  • Display Ads
  • Video Ads
  • Gmail Ads

Google Ads provides access to the largest audience of potential clients and customers, as well as a number of different ways to set up and run campaigns depending on specific goals.

But regardless of the platform and ad format, the way that PPC works remains largely the same. The high level process for PPC is:

  1. Sign up to an advertising account with the platform.
  2. Create ads (and select the right targeting by adding keywords or audiences, etc.).
  3. Set the maximum cost you are willing to pay for each click.
  4. Your ad goes into an auction with other advertisers who are bidding on the same keywords.
  5. The auction determines the order in which the ads are shown.
  6. You pay when someone clicks your ad.

In practice it is not overly complex to setup and get started with PPC. However knowing which ad types, ad copy, audience definition, keywords, and budget take skill and experience to achieve cost effective results.

How do Google Ad auctions work?

When a user performs a search, an ad auction takes place that is used to determine factors including:

  • An ad account’s eligibility to enter the auction.
  • The order in which eligible ads will appear in the ad space on the results pages.
  • How much a click will cost each of the advertisers whose ads are showing.

The first factor on the auction here is the maximum CPC (cost-per-click) that an advertiser sets in their ad account either for a specific keyword or ad group — this is the most that they are prepared to pay for each click.

But it doesn’t necessarily mean that this is how much they will actually pay, it is just the maximum. Another variable is the Quality Score (QS), a metric that consists of a number of different factors such as the expected CTR (click-through rate) of an ad, the relevancy of an ad to the query being searched for, and the experience of the landing page that the ad will send traffic to.

The position of an ad on the results page is determined by the Ad Rank, which can be defined in simple terms as:

Ad Rank = Quality Score x Max CPC

Google’s actual formula is a little more complex, but for the purpose of this guide it’s good enough.

Here is how your actual Google Ad CPC is calculated:

Cost Per Click = Ad Rank of the advertiser below / Quality Score + $0.01

Why Use PPC?

If you are considering PPC for digital marketing for your business, you will want to know the benefits and why you should invest your budget here and not elsewhere.

Here are some of the most common reasons why PPC could be the right advertising channel for you:

Get Clicks Fast

When an ad account is setup and an ad drafted it will need to be approved by the platform, but this usually takes no more than a few hours, but can take upto 2 days.

When your ads are live, eligible to run in the auction, and your bid is high enough they will start appearing (and receiving clicks so long as the volume is there) very quickly.

Compared to channels such as SEO, PPC allows you to start seeing returns very quickly; and this is absolutely one of the reasons why it is so popular with marketers.

Measured and Tracked

One of PPC’s main benefits over traditional advertising channels is the ability to easily measure and track the return on ad spend.

Platforms like Google Ads and Bing Ads, allow you to track conversions, including order or lead values. They also enable you to see, at a granular level, the ROI of not just of the overall account but specific ad groups and keywords. This means that you are able to use data and insights to effectively refine the efficiency and performance of a campaign over time to increase the ROI of the channel.

Ads Visibility and Budget Control

PPC allows you to temporarily pause advertising during a busy period, run ads only when you need to generate new leads or boost sales. Whilst in practice you can easily turn on and off Google Ads, it is not best pratice,. Google Ads can take upto 14 days to ‘learn’ and optimize results, so tuning them on and off can be inefficient.

PPC provides full control over how much you spend each day (or month) and how much you pay per click, in comparison to other advertising methods.

Target Your Ideal Customers

PPC allows you to target your ideal customer based on your data, Google Ads also allows you to adjust bids based on devices used (iOS, Andriod, Mobile, Desktop, Tablet) and the time of day, and location.

If you know your customer and how they search, you can use these insights to improve advertising cost per converstion.

Multiple Ad Formats

Run an eCommerce store? Use shopping ads to display your products right on the search engine results page in top of page position. Want to bring back cart abandoners? Use (annoying) display ad remarketing to server an offer to encourage the customers back to your store.

PPC encompasses a whole range of different ad formats, and these can be used to drive success for specific businesses and use scenarios.

PPC vs. SEO

Often, businesses consider both SEO and PPC to help them drive traffic from the search engines. While there is no question that they both involve appearing on, and getting clicks from, search engines, they are very different.

  • PPC involves paying per click.
  • SEO (organic search) clicks are free.
  • You can start to drive traffic with PPC from the search engines very quickly, whereas it can take time to rank organically (6 months+).

The two aren’t competing channels, they are both parts of a much wider digital marketing mix, and they can and should work together effectively to drive success online.

Whenever possible, try to avoid comparing these two channels and see both as vital parts of driving digital growth.

Search Ad Campaigns

Let’s take a look at the search ad campaigns, helping you understand what the different components mean when using this type of PPC ad.

Campaigns and Ad Groups

The main structure of search ads sees an account split up into ‘campaigns’ and ‘ad groups.’

You need to have a good grasp on both of these concepts, as they form the foundations of your account.

Campaigns

Unless you are setting up a large account, you will usually only have a small number of campaigns in your account. A campaign contains multiple ad groups which, in turn, contain ads and keywords. In most instances, campaigns should be based on how you want to allocate budget or set goals.

As an example, let’s say you are a Financial Planner. You might set up different campaigns for ‘Mortgages’ and ‘Insurance Products’ so that you can keep budgets, targeting, and other adjustments separate.

Ad Groups

Ad groups are a node under campaigns and home to both ads and keywords. In Google’s words, “An ad group contains one or more ads that share similar targets. You set a bid, or price, to be used when an ad group’s keywords trigger an ad to appear.”

The number of ad groups that you will have within a campaign really depends upon your business and the number of keyword groups that you will be bidding on.

You can include multiple keywords (and match types) within an ad group. Some PPC specialists like to use a structure known as SKAGs (single keyword ad groups) that includes just one keyword per ad group, to allow for maximum control over targeting and bidding.

Keywords

Keywords are what trigger an ad to show on Google. When a user runs a search for a query, the keywords used in an ad account are matched against the query to show ads.

Different match types can be used for keywords, and these control when variations of a keyword trigger an ad to show. You can set unique max CPC bids for keywords in an ad group.

Keyword Match Types

Match types allow you to control which search terms will trigger your ads and how wide the variants are.

The keyword match types you can use are:

  • Broad Match: Where ads are able to show for searches that include misspellings, synonyms, related searches, and other related variations. A search for ‘women’s dress’ would trigger an ad for ‘ladies dress.’ This gives you the least control over the terms that trigger an ad.
  • +Broad +Match +Modifier: This works in a similar way to broad match, but will only trigger for search terms that include the words with a + sign in front of them.
  • “Phrase Match”: This will show ads for terms that include additional words either before or after the keyword.
  • [Exact Match]: This will only show for the exact keyword and very close variations. This gives you the tightest control over the terms that trigger an ad.

Negative Keywords

Negative keywords allow you to prevent an ad from showing for searches that include that term. This provides a great level of control when combined with insights from the search terms report, meaning that you can stop your ads from showing for terms that may be similar, but aren’t relevant, or wouldn’t convert.

Using negative keywords is an effective way to prevent wasted budget and traffic that isn’t deemed to be relevant.

Ads

Ads are what show on the search engine results when you successfully win a bid auction and are what encourages a user to click. Typically multiple ads are created within an ad group.

You need to be sure to write engaging ads (‘Copy’) that clearly communicate your message.

Writing engaging ad copy takes skill and consideration on your sales messaging

Bid Adjustments

You can either increase or decrease the maximum CPC for a campaign for different devices, times of the day, or specific audiences. Adjusting bids in this way means that you can adjust bids based on the likelihood of a user converting, and other factors.

If you know that you have a lower conversion rate on mobile devices you might add a negative bid adjustment to reduce the max CPC that you are willing to pay for clicks from mobile devices to compensate for the lower conversion rate.

Location Targeting

If you are a local business and only serve customers in a specific geographical area, you can use location targeting to control who sees your ad.

You can target multiple locations (with different bid adjustments) within an ad group, either by choosing a city or region or setting a radius target.

Ad Schedule

Ad scheduling allows you to adjust bids (or stop bidding all together) based on the time of the day and create a custom ad schedule to not waste money on clicks that aren’t converting.

Campaign Budget

You can set your campaign’s daily budget based on what you want to spend.

Google Ads can, and will, overspend by up to two times your daily budget, but never by more than you spend in a month.

Google states, “Up to 2 times your campaign’s average daily budget can be used to show your ads on certain days of the week or certain times of the month based on fluctuations in traffic — but not more than you spend on your campaigns each month. If your average daily budget is US$10, up to US$20 can be used to show your ads on certain days based on fluctuations in traffic.”

Ad Extensions

Ad extensions let you add more information to your ads and occupy more screen real estate. They allow you to enhance a standard search ad to encourage a user to click and stand out and help showcase that your result is the most relevant to a query.

A click on an ad extension costs the same as a click on the main ad.

Bidding Strategies

PPC typically means that you pay-per-click on the ad platforms however other bidding strategies are available.

In addition to a pay-per-click model and can also, depending on the ad format you are using and your goals, other strategies maybe available including:

  • Target cost per action (CPA)
  • Target return on ad spend (ROAS)
  • Maximize Conversions
  • Maximize Conversion Value
  • Maximize Clicks

Rather than setting a maximum CPC, with these other bidding strategies, you allow Google to automatically set bids for you and are paying based on an action, a target ROAS, or are placing a focus on getting the most clicks or conversions for your budget.

Keyword Research & Competitor Analysis

One of the keys to driving a significant ROI from the PPC digital marketing is to put time into doing research in order to clearly understand the following:

  • keywords and phrases to bid on and how much this should this cost?
  • competitor PPC ads that are running and what specific messaging they are using?

You can find the right keywords to use in your campaign with the Google Keyword Planner tool. The tool allows you tool research keywords, volumes, and current cpc price range.

Summary

PPC is a great way to generate consistent high quality traffic fast. When done correctly it should be a profitable digital marketing strategy for your business.

In 2021 Google Ads PPC brings with it a wealth of benefits and it is relatively quick to get started compared with alternatives.

If you need help with PPC learn more here.

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