Pay per click (PPC)

PPC is an Internet advertising model used on search engines, advertising

networks, and content sites, such as blogs, in which advertisers pay their host only
when their ad is clicked. With search engines, advertisers typically bid on keyword
phrases relevant to their target market. Content sites commonly charge a fixed price
per click rather than use a bidding system.

Websites that utilize PPC ads will display an advertisement when a keyword
query matches an advertiser's keyword list, or when a content site displays relevant
content. Such advertisements are called sponsored links or sponsored ads, and
appear adjacent to or above organic results on search engine results pages, or
anywhere a web developer chooses on a content site.

Although many PPC providers exist, Google AdWords, Yahoo! Search

Marketing, and Microsoft adCenter are the three largest network operators, and all
three operate under a bid-based model. Cost per click (CPC), varies depending on
the search engine and the level of competition for a particular keyword.

The PPC advertising model is open to abuse through click fraud, although
Google and other search engines have implemented automated systems to guard
against abusive clicks by competitors or corrupt web developers.

I. Cost per Click

There are two primary models for determining cost per click: flat-rate and bid-
based. In both cases the advertiser must consider the potential value of a click from a
given source. This value is based on the type of individual the advertiser is expecting
to receive as a visitor to his or her website, and what the advertiser can gain from
that visit, usually revenue, both in the short term as well as in the long term. As with
other forms of advertising targeting is key, and factors that often play into PPC
campaigns include the target's interest (often defined by a search term they have
entered into a search engine, or the content of a page that they are browsing), intent
(e.g. to purchase or not), location and the day and time that they are browsing.

a) Flat-Rate PPC

In the flat-rate model, the advertiser and publisher agree upon a fixed amount
that will be paid for each click. In many cases the publisher has a rate card that lists
the CPC within different areas of their website or network. These various amounts
are often related to the content on pages, with content that generally attracts more
valuable visitors having a higher CPC than content that attracts less valuable visitors.
However, in many cases advertisers can negotiate lower rates, especially when
commiting to a long-term or high-value contract.

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 The flat-rate model is particularly common to comparison shopping engines,
which typically publish rate cards. However, these rates are sometimes minimums
and advertisers can pay more for greater visibility. These sites are usually neatly
compartmentalized into product or service categories, which allows for a high degree
of targeting by advertisers. In many cases, the entire core content of these sites is
paid ads.

b) Bid-Based PPC

In the bid-based model, the advertiser signs a contract that allows them to
compete against other advertisers in a private auction hosted by a publisher or, more
commonly, an advertising network. Each advertiser informs the host of the maximum
amount that he or she is willing to pay for a given ad spot (often based on a
keyword), usually using online tools to do so. The auction plays out in an automated
fashion every time a visitor triggers the ad spot.

When the ad spot is part of a search engine results page (SERP), the
automated auction takes place whenever a search for the keyword that is being bid
upon occurs. All bids for the keyword that target the searcher's geo-location, the day
and time of the search, etc. are then compared and the winner determined. In
situations where there are multiple ad spots, a common occurance on SERPs, there
can be multiple winners whose positions on the page are influenced by the amount
each has bid. The ad with the highest bid generally shows up first, though additional
factors such as ad quality and relevance can sometimes come into play (see Quality
Score).

In addition to ad spots on SERPs, the major advertising networks allow for

contextual ads to be placed on the properties of 3rd-parties with whom they have
partnered. These publishers sign up to host ads on behalf of the network. In return,
they receive a portion of the ad revenue that the network generates, which can be
anywhere from 50% to over 80% of the gross revenue paid by advertisers. These
properties are often referred to as a content network and the ads on them as
contextual ads due to the fact that the ad spots are associated with keywords based
on the context of the page on which they are found. In general, ads on content
networks have a much lower click-through rate (CTR) and conversion rate (CR) than
ads found on SERPs and consequently are less highly valued. Content network
properties can include websites, newsletters, and e-mails.

Advertisers pay for each click they receive, with the actual amount paid based
on the amount bid. It is common practice amongst auction hosts to charge a winning
bidder just slightly more (e.g. one penny) than the next highest bidder or the actual
amount bid, whichever is Loir. This avoids situations where bidders are constantly
adjusting their bids by very small amounts to see if they can still win the auction while
paying just a little bit less per click.

To maximize success and achieve scale, automated bid management systems

can be deployed. These systems can be used directly by the advertiser, though they
are more commonly used by advertising agencies that offer PPC bid management as
a service. These tools generally allow for bid management at scale, with thousands
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or even millions of PPC bids controlled by a highly automated system. The system
generally sets each bid based on the goal that has been set for it, such as maximize
profit, maximize traffic at breakeven, and so forth. The system is usually tied into the
advertiser's website and fed the results of each click, which then allows it to set bids.
The effectiveness of these systems is directly related to the quality and quantity of
the performance data that it has to work with - low-traffic ads can lead to a scarcity of
data problem that renders many bid management tools useless at worst, or inefficient
at best.

II. History

In February 1998 Jeffrey Brewer of Goto.com, a 25-employee startup

company (later Overture, now part of Yahoo!), presented a pay per click search
engine proof-of-concept to the TED conference in California. This presentation and
the events that followed created the PPC advertising system. Credit for the concept
of the PPC model is generally given to Idealab and Goto.com founder, Bill Gross.

Google started search engine advertising in December 1999. It was not until
October 2000 before the AdWords system was introduced, allowing advertisers to
create text ads for placement on the Google search engine. However, PPC was only
introduced in 2002; until then, advertisements were charged at cost-per-thousand
impressions. Yahoo! advertisements have always been PPC-based since their
introduction in 1998.

III. PPC in the Czech Republic

a) Google AdWords

Worldwide most popular PPC advertising system Adwords from Google Inc..
Works well even on the Czech internet. Ads are displayed in the right hand column in
the search results in search engine Google. According to statistics, can Google
AdWords (for us in the Czech Republic) to bring about 30% of the total number of
visitors from all visits PPC campaigns.

b) Sklik

PPC Advertising system Sklik from Seznam.cz, as the system is similar to

Google AdWords and is one of the most effective advertising system functioning on
the Czech internet. According to statistics from the practice brings Sklik about 40% of
the total number of visitors from all visits PPC campaigns. Ads Sklik is displayed in
the search results in search engine list and the list of other services (eg, businesses,
or Sbazar Encyclopedia).

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 c) ETARGET

Advertising system ETARGET from ETARGET, and displays your ads on

several hundreds of their partners. Adverts show how the search results (fulltext) and
in the catalog or website content.

IV. Where can you find it?

V. Price in CZK

Price is about 5czk per click, which makes 5000czk per advertisement
packages. Packages guarantees 1000 or 2500 click and this is what you pay for.

Minimum price pre click found is around 0.2 CZK, whereas the maximum price
found was USD 100.

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 VI. Conclusion

PPC is one the important features of internet marketing nowadays. It allows

advertiser reach new goals in much more efficient way compared to classic internet
marketing tools such as banners. The evolution of PPC was fast as well as its
incorporation into practice. The future of PPC advertising scheme is more than
promising therefore it is very advisable to follow the latest trends in terms of PPC.

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Resources

adwords.google.com

www.lupa.cz

www.sklik.cz

www.ataxo.cz

www.etarget.cz

www.ppc-marketing.cz

en.wikipedia.org/wiki/Pay_per_click

Changhyun Kwon: Single-period balancing of pay-per-click and pay-per-view online

display advertisements. Journal of Revenue & Pricing Management, 2011, Vol. 10,
p261-270.