How Does Pay Per Click (PPC) Work?

PPC can be overwhelming.

Do it right, and you’ll have more leads than you know what to do with. But do it wrong, and your ads will be nothing more than a black hole of wasted money.

So in this comprehensive guide, we’ll cover everything you’ll need to know about PPC in 2023—let’s dive in.

What You’ll Learn:

An overview of what PPC is
Understanding how it works
What businesses get out of using PPC
The most popular types of pay-per-click (infographic)
How much does PPC usually cost?
How long does it take?
The anatomy of a PPC campaign (infographic)
How Google Ads auctions work
Types of targeting Pay-per-click ads have
The difference between Google PPC and Bing PPC
Pay-Per-Click FAQ

What Is Pay-Per-Click (PPC)?

PPC stands for “pay-per-click.” It’s a type of online marketing in which businesses pay a fee each time someone clicks their ads.

For instance, when you search “best lawn mowers” on Google, sponsored ads appear at the top of the search results. Compared to organic listings, these ads appear with the words “Ad” in green, making it clear that these are paid placements.

A Basic Overview Of Pay-Per-Click

At its core, pay-per-click marketing involves buying ads that appear on search engine results pages like Google and Bing. Those aren’t the only options though—others, like Amazon—are increasingly popular.

Using PPC, you’ll bid on keywords and phrases related to your business that people use when searching online. The higher you bid and the more relevant your ads, the higher your ad placement

The cost of the ad will depend on which keywords you choose, how much competition there is, and the quality of your ad.

Key Performance Indicators of PPC

When running PPC campaigns, you’ll need to track specific key performance indicators (KPIs) to ensure your campaigns are successful. These KPIs will enable you to measure your return on investment (ROI) and make necessary adjustments to your campaigns.

The most important PPC KPIs to track are:

Click-through rate (CTR): https://ignitevisibility.com/what-is-a-good-click-through-rate/This is the percentage of people who click on your ad after viewing it.
Cost per click (CPC): This is the amount you pay each time someone clicks on your ad.
Conversion rate: This is the percentage of people who take a desired action after clicking your ad.
ROI: This is the ratio of revenue generated by your ads compared to your ad spend.

How Does PPC Work?

When running a PPC campaign, you’ll start by selecting keywords you’re interested in targeting.

Then, you’ll create an ad with these keywords and submit it to the relevant search engine. Once approved, your ad will appear in search engine results alongside organic listings.

When someone searches for a keyword related to your business, your ad could appear at the top of the search engine results page. If someone clicks on your ad, you’ll be charged a fee based on the cost-per-click (CPC).

Formats Based on Platform

Depending on which platforms you use, there are several different ad formats you can choose from.

Google

Search ads: Text-based ads appearing at the top of the search results page.
Display ads: Image-based ads that appear on other websites within the Google Display Network.
Video ads: Video-based ads appearing on YouTube, across the Google Display Network, or even on the search results page.
Shopping ads: These are ads that feature product images, prices, and descriptions to shoppers on Google Shopping or other online stores.

Amazon

Sponsored product ads: Ads with product images. prices and descriptions that appear among organic search results.
Sponsored brand ads: Ads with images, text, and a logo that appear at the top of the search results page.

Facebook

- Video ads: Video-based ads appearing on the user’s newsfeed.
- Carousel ads: Ads featuring multiple images, videos, or products that can be scrolled through by the user.
- Lead ads: Ads encouraging users to sign up for a service by submitting their contact information directly from the website.

Sponsored content ads: Ads appearing in the news feed.
Text ads: Ads appearing on the right-hand side of the screen.
Dynamic ads: Ads tailored to the user’s interests, job title, and other criteria.

Benefits of PPC Marketing

Here are some of the main reasons businesses use PPC marketing:

It’s cost-effective: Pay-per-click marketing is much more cost effective than traditional marketing strategies like radio and television ads.
It’s trackable: PPC marketing is trackable and measurable, allowing you to see exactly how your campaigns perform.
It’s fast: With PPC marketing, your ads can go live as soon as you create them.
It’s targeted: With PPC, you can target your ads to people who have already indicated an interest in your products or service.
It’s scalable: PPC campaigns can be scaled up or down depending on your budget.
It’s flexible: PPC campaigns can be easily adjusted to maximize your ROI.

You can also use PPC campaigns to reach new customers, reach different test markets, get feedback on your product, and much more.

What Are the Most Popular Types of PPC?

The most popular types of PPC ads are:

Google search ads: Appear in the sponsored section of the search results page. They appear when someone searches a keyword directly related to the advertised product or service.
Google display ads: Image-based ads that appear on websites within the Google Display Network. These ads are usually more visually appealing and are great for building brand awareness.
Remarketing ads: Appear to people who have already visited your website or interacted with your brand in some way. These ads can be used to re-engage with interested customers and encourage them to make a purchase.
Social ads: Ads appearing on social media platforms like Facebook, Instagram, Twitter, and LinkedIn. These ads are typically image or video-based and are used to promote your product or service.
Shopping ads: Ads featuring product images, prices, and descriptions that appear in search results and on other online stores. These ads are great for ecommerce businesses.
Gmail ads: Image and text-based ads appearing in users’ Gmail inboxes (free plans only).
Bing search ads: Ads appearing in the sponsored section of the Bing search results page. These ads are similar to Google search ads.

Google vs. Bing

There are two major PPC platforms: Google Ads (formerly known as AdWords) and Bing Ads. They’re both powerful platforms for running PPC campaigns, but each has its own advantages.

Google Ads

Google Ads is the most popular PPC platform.

It’s a comprehensive platform that can be used to create and manage search and display campaigns.

Google Ads is great for businesses of all sizes, as it’s highly customizable and has various features that allow you to set and adjust your bidding strategies, budget, and even schedule ad campaigns.

It’s also integrated with Google’s other products, like Google Analytics, which can provide valuable insights into your ad campaigns.

Bing Ads

Bing Ads is Microsoft’s PPC platform. It works similarly to Google’s pay-per-click ads but has a few differences. For example, it has fewer search engine partners, making it less comprehensive than Google Ads.

Bing Ads is best for businesses targeting users who use Bing as their primary search engine or businesses that want to supplement their Google Ads campaigns.

How Much Does Pay Per Click Cost?

While PPC costs average between $1 and $7, the honest answer is more complex than that.

For example, while targeting the keyword “babysitting” in your area might cost you around $1 per click, targeting a more valuable keyword like “immigration lawyer” can cost upwards of $30 for each click.

This is because the cost of PPC ads is determined by a bidding system, where you compete with other advertisers for the same keyword—and the highest bidder wins.

And if your industry has a high average order value, marketers will be willing to pay a higher amount per click, as they know they’ll get a good return on their investment.

The most precise way to figure out how much you should be paying is to use Google Ads’ Keyword Planner tool. It’s free and estimates how much you should expect to pay for each keyword.

Using Keyword Planner to Determine Google Ads Cost Per Click

How Long Does PPC Take to Produce Results?

PPC campaigns take a certain amount of time to produce results, depending on factors such as the keywords you’re targeting, your ad copy, and your budget.

Of course, the basic answer is “as long as it takes to set up your account.” But, in practice, the time frame for PPC campaigns can vary drastically.

For example, if you’re running a search campaign, you may see results within just a few days. But, if you’re running a more complex display campaign, it could take weeks or even months to mature.

In short, PPC isn’t a “set it and forget it” strategy. It takes time and ongoing optimization efforts to get the most out of your campaigns.

How Does the Google Ads Auction Work?

Google Ads runs on a unique auction system. This system is how Google decides which ads to serve before each search query and how much each advertiser pays for that query.

The auction works by ranking all ads according to their “Ad Rank.” AdRank is determined by an algorithm that considers several factors, such as an ad’s bid and quality score.

Advertisers are then charged a cost per click (CPC) based on AdRank. The higher the Ad Rank, the more an advertiser pays for each click.

Advertisers also have the option to set bid limits on their campaigns, which helps manage budgets. With bid limits, advertisers can set a maximum bid they’re willing to pay, and Google will not charge more than their limit.

Let’s go back to our immigration lawyer example. If the average bid for “immigration lawyer” is $20, you might set your bid limit at $25. If your Ad Rank is high enough, you could get a higher CPC, but you will never pay more than the $25 you set as your bid limit.

Anatomy of a PPC Campaign

Before launching a PPC campaign, it’s crucial to have a plan in place. At a minimum, a campaign should include:

Goals: What do you hope to accomplish with your PPC campaign? For example, do you want to increase traffic to your website? Generate more leads? Increase sales?
Audience: Who do you want to target with your ads? This includes demographic characteristics like age, location, job title, etc.,
Budget: How much are you willing to spend on your campaign? If you’re starting out, you may want to start with a smaller budget to get your campaign up and running.
Ads: What kind of ads will you run? Depending on your goals, you may choose to search, display, or video ads.
Keywords: What keywords or phrases will you target with your ads? You’ll want to choose keywords whose intent matches conversion goals (purchase, citations, etc.).
Ad text: What will your ads say? This includes both the headlines and descriptions of your ad.
Landing page: What page on your site will users be directed to when they click on your ad? This is typically a product or service page or a page specifically created for your PPC campaign.
Tracking: How will you track your campaign’s performance? For example, do you want to use UTM parameters to track the performance of each ad?

What Kind of Targeting Abilities do PPC Ads Have?

PPC campaigns have a massive range of targeting abilities. For example, on Google Ads and Bing Ads, you can target based on various criteria, including keyword match types, location, device type, language, and more.

For example, let’s say you’re running a search ad for a local law firm. With PPC, you could target those ads to people searching for “lawyer in [city name]” on their desktops within a 5-mile radius of your office

You could also use AdWords remarketing to target users who have already visited your site. For example, if you offer tax preparation services, you could target ads to people who have previously visited your tax preparation page but haven’t yet converted.

Using the proper targeting criteria ensures that your PPC ads reach only the most relevant audience. This will help you get more bang for your buck—and a higher return on investment.

Social media platforms like Facebook and Twitter also offer extensive PPC targeting options. Facebook Ads allow you to target users based on various criteria, including gender, location, interests, and more.

Twitter’s PPC offering is similar, with the bonus of keyword targeting. This means you can target your ads to people tweeting about specific topics or looking for products or services you have to offer.

PPC campaigns offer a wide range of targeting options.

Still, your campaign’s success depends primarily on how relevant your targeting is. The better your targeting, the better the results.

Choosing a Bidding Strategy

When running PPC campaigns, you’ll need to choose a bidding strategy. Bidding strategies tell Google (or Bing) how much you will pay per click.

One of the most popular strategies is manual bidding.

With manual bidding, you set your bids for each keyword. This allows you to adjust your bids based on what you’re willing to pay for each click—and helps you stay within your budget.

To illustrate, imagine you’re running a search ad for a local law firm. You know that “family lawyer” is a keyword you want to target, but it’s also a highly competitive keyword.

Using manual bidding, you can set a higher bid for this keyword, ensuring your ad appears at the top of the page—and potentially paying more per click than you would for less competitive keywords.

Another popular bidding strategy is “Enhanced CPC.” This method lets Google adjust your bids automatically based on device, location, and keyword relevance.

Google’s algorithms will increase or decrease your bids as necessary to get more clicks and conversions at a lower cost.

Finally, you can also use automated bidding strategies like “Target CPA” or “Maximize Conversions.” Automated bidding strategies are beneficial if you don’t have the time or resources to manage your bids manually.

These strategies allow you to set a goal (such as cost per acquisition or CPA) and let Google’s algorithms adjust your bids to meet that goal. If you’re aiming for a lower CPA, Google will adjust your bids to try to get you the most conversions at the lowest cost.

But no matter your bidding strategy, it’s essential to monitor your campaigns regularly. This ensures you’re getting the most from your PPC campaigns—and outperforming your competitors.

Performing Keyword Research Effectively

One of the most critical steps in running a successful PPC campaign is performing effective keyword research. You’ll need to know which keywords to target with your ads to reach the right audience.

To start, create a list of relevant keywords. Then, you can use tools like Google’s Keyword Planner or Aherfs Keyword Tool to help you find keywords with a high search volume but as low competition as possible.

Once you have a list of relevant keywords, you’ll need to narrow it down to the best ones. Try grouping similar keywords into “ad groups” and focusing on a few high-performing keywords for each ad group/

For example, suppose you’re running an ad for a local law firm. In that case, you might create an ad group for “family law” with keywords like “family lawyer,” “divorce lawyer,” and “child custody lawyer.”

Finally, you’ll want to test different keywords to see which ones bring you the best results. Try changing up your keywords and tracking their performance over time. This will help you determine which keywords are most effective—and where to focus your budget.

Just remember that generally speaking, more specific is better. So instead of using general keywords like “lawyer,” focus on long-tail keywords like “divorce lawyer in [city name],” which will help you reach a more relevant audience.

Build Your First PPC Ad Campaign

Once you’ve done your keyword research, it’s time to build your first PPC ad campaign.

Start by creating an ad in the platform of your choice (such as Google Ads or Facebook Ads). As explained above, start with effective keyword research. Then, use this data to create ad groups and create ads for each group.

When creating your ads, use ad copy that speaks directly to your target audience. Use language they’re likely to be searching for, and include a solid call to action.

You should also optimize your landing pages for each ad group. For example, if a user clicks on an ad for a family law attorney, make sure they land on a page with relevant content about family law rather than your home page or a generic “lawyer” page.

Finally, set up tracking for each ad campaign using Google Analytics or a similar tool. This will help you track your ads’ performance and make changes as necessary to optimize your campaigns.

Managing Your PPC Campaigns

Keep in mind that PPC is a long-term strategy as much as it’s a short one. So to get the most out of your campaigns, you should manage the following metrics daily, weekly, and monthly:

Day-by-Day

Monitor your campaigns daily and tweak your bids as necessary based on performance
Keep an eye on your traffic quality to ensure you’re getting the best possible results.

Week-by-Week

Assess your campaigns’ performance and adjust your budgets and targeting as needed
Consider adding new ad groups or keywords if you do not see the results you want
Split-test different ad copies to see which works best

Month-by-Month

- Analyze and assess your campaigns’ performance over the past month
- Identify campaigns that are performing well and campaigns that need improving
- Evaluate your targeting and make changes if needed
- Set new goals and readjust your budget as necessary

Pay-Per-Click FAQ:

1. How do I select the best keywords for my pay-per-click campaign?

Quality keywords will make or break your campaign.

To ensure that you are using the right keywords, you’ll need to do some research. Tools like SEMRush, SpyFu, or Similar Web can make your research easier.

Before you start, consider things that will affect your audiences’ searches like seasonality, competition, or geographic location.

You can also use match types to gain insight into your audiences’ preferences. Different match types will produce different search results so really think about what types of results you’re looking for.

Since browsing experience varies across different types of devices, consider this as well. Consumers that use a mobile device or tablet to perform searches often use shorter phrases and their queries contain typos. They also tend to search for local solutions to their problems. All of this will affect which keywords perform well for your page.

Finally, keep in mind that PPC is a long game and it’s okay to test keywords, try new ones, and review your performance over time. If a keyword that used to work for you suddenly stops working, there’s nothing wrong with trying a different one.

2. How many keywords should I have in an ad group?

This one will also depend on your product and who’s managing your campaign. Some prefer to use less, but keep in mind that the most important aspect of keywords is relevancy. The more keywords you have, the less likely it is that each one is relevant. It’s generally recommended to use less than 20 per ad group.

3. How long does it take to see results?

This will vary from campaign to campaign, so don’t lose hope if you don’t see immediate results. It usually takes a few weeks to build an account. Then you need to gather data. In most cases, after 2 to 4 months you will know if pay per click marketing is right for your business (or if your pay per click manager is terrible or not).

While the average is between 2 and 4 months, some experts say that it can sometimes take up to 8 months before you truly understand how your PPC campaigns have affected your company’s profitability.

The short answer: Be patient. Success won’t happen overnight. It will take time.

4. What are some common mistakes to watch out for when learning how does pay per click works?

Some common mistakes include:

Not using keyword match correctly – you can choose between three options, broad match, phrase match, or exact match. The match type you choose can have a big impact on your campaign, as each is suited to different ad goals.
Not using negative keywords. Opposite of your chosen keywords, negative keywords are words or phrases you don’t want your ad to show for. They can be chosen in much the same way as your positive keywords.
Not testing your ads. A/B tests are particularly handy for testing different ad elements like CTAs, creatives, messaging, and match type to see which is most effective for your goals.

5. What is CPC?

CPC stands for “cost per click.” It’s based on the number of times users click on an ad. It’s an important concept to understand if you’re running pay-per-click campaigns because this will affect the amount of money you’re charged to run your ads on certain sites.

CPC is different from the CPM (cost per thousand) revenue that some sites use. CPM charges by ad impressions, not clicks. Under a CPM model, it doesn’t matter how many people click on your ad. You’re charged off of how many people see it.

It’s important to understand CPC and CPM before you launch your campaign because it will seriously affect your budget and whether or not your PPC campaigns increase your return on investment.

6. How Can I Reduce My Google Ads CPC?

You can lower your CPC for your Google Ads PPC campaign by improving your Quality Score. Here are some ways to do that:

Improve your click-through rate (CTR) – Your CTR measures the percentage of people who click on your ad after seeing it. The higher the CTR, the better your Quality Score. That’s why you need to create compelling ad copy that tempts users to click.
Optimize your ad and landing page for your keyword – The relevance of your ad and your landing page to your keyword will also influence your Quality Score. Make sure your ad titles and descriptions use your keywords. Also, make sure your landing pages are optimized for your keywords as well.
Create a landing page with a positive user experience – Finally, create a landing page that offers a positive user experience. Make sure it’s easy to navigate and presents a professional display on desktops, laptops, smartphones, tablets, and phablets.

7. What Are Some PPC Best Practices?

There are several basic principles you should follow to ensure that you generate a positive return with your PPC campaign:

Split test your ads. Never assume that your ad is going to be successful. Try multiple ad versions with different headlines and descriptions. If you see that one version of your ad is getting way more clicks than the other one, use that version to reach your audience.
Don’t use multiple keywords in the same ad. As a rule of thumb, it’s best to keep a 1:1 ratio between PPC ads and keywords.
Track conversions as well as clicks. You might think that your ad is fabulous because it has a high click-through rate. But if people aren’t becoming paying customers once they get to your landing page, something is wrong.
Don’t use your home page as your landing page. Use a landing page that’s optimized specifically for your keyword and is designed to land sales.
Don’t use broad match keywords. You might be under the impression that broad match keywords will get you the most clicks. That might be the case, but they aren’t necessarily clicks from people in your target market. With broad match, you’ll likely waste money on clicks that will never convert.

8. What’s a Bidding Strategy?

Many pay per click platforms operate on an auction system. That means people are bidding for digital real estate on a website or a keyword.

Of course, the more popular the website or keyword, the more money people will bid for their ads. That’s the nature of supply and demand.

Some platforms also let you bid on position, or where your ad will show up on the screen.

Your bidding strategy will dictate the amount of money you’re willing to spend per click or per acquisition for a specific ad spot or keyword.

Here are some of the more popular pay per click bidding strategies:

Maximize conversions – This is where you throw caution to the wind and bid high so that you can get as many clicks on your ad as possible.
Cost per acquisition – You set a budget per acquisition instead of per click. The ad platform will optimize your bidding so that you hit your target.
Return on ad spend – You specify how much revenue you expect to gain above your costs. The ad platform adjusts your bid so that you earn the expected return.

9. What Is Pay Per Click Management?

It’s quite possible that you have better things to do than manage your PPC campaigns. If that’s the case, then you should outsource your pay per click advertising to a qualified digital marketing team.

That will cost you, of course. But it’s an investment.

Also, you’ll have more time to devote to growing your business.

Get started with pay per click today! If you need help, we are here to run your campaigns for you.

10. Should I use Yelp’s PPC advertising program?

A lot of people think Yelp is just a review site, but that’s merely the start.

At its core, it’s a business directory site, and it can have a huge impact on businesses across industries. It’s a modern-day Yellow Pages, but way more robust.

Yelp CPCs vary quite a bit, which means you may see your ROAS differ. But if you’re already using Google Ads and Microsoft Advertising yet still have marketing money to allocate, it may be the right option for you.

Plus, Yelp adds new features to its advertising platform on a regular basis, and you can always try out its free tools before committing. No harm, no foul, right?

11. What’s a good click-through rate (CTR)?

A good CTR will vary largely by industry.

According to a Wordstream study, the average CTR for PPC ads across all industries is 1.91% for search and 0.35% for display

Dating and personal services see the highest with a 3.4% CTR, followed closely by Finance and Insurance, B2B, Consumer Services, and Technology.

Legal Services, Industrial Services, Advocacy, Ecommerce, and Advocacy tend to see the lowest CTRs.

If you’re looking to be more than average, aim for a CTR of 4-5% on Search and 0.5-1% on Display. These percentages are above average and tend to lead to good results.

Make sure to pay attention to your CTR. A high CTR also means a better Quality Score. If you want a good predictor of the success of your PPC campaign, check out your Quality Score.

12. Is PPC expensive?

PPC can be expensive at times but like all other forms of advertisement, it all comes down to the quality of the return on your investment.

If done right, the expense will be totally worth it. On the flip side, if you don’t have a good strategy and execution, you probably won’t see PPC as a worthwhile investment.

There are a number of ways to test different ad campaigns and work up slowly to make sure you’re getting the most bang for your buck.

And remember, you are in complete control when it comes to how much you pay for PPC ads. If one month, your ads don’t seem to be doing as well, you can always pause them for a bit until your budget allows for more spending power.

13. Does pay-per-click work?

It sure does! In fact, studies have shown that PPC visitors are 50% more likely to purchase from a site than an organic visitor.

The top three positions account for around 12% of the clicks on the page.

Combined, the top 3 middle ads, as well as side ads, attract 25% of all search engine clicks. Surely that’s nothing to ignore!

To make sure that your PPC campaigns will be successful, don’t go into it blindly. Follow the tips in this article to design a clear strategy. PPC campaigns take research and work but when done correctly, they can make a huge difference to your bottom line.

11. When should I use PPC?

PPC campaigns can be a great way to quickly get your message in front of a large audience.

It’s beneficial for businesses that need to reach a specific customer base or drive traffic quickly. PPC is also an excellent option for lead generation or ecommerce businesses thanks to its ability to skip the SERPs ranking process.

12. How does PPC differ from SEO?

PPC and SEO are two ways to attract visitors to your site. PPC is an auction-based system where you bid on keywords and pay for each click, while SEO focuses on optimizing your website for organic search traffic

PPC is typically a short-term solution, while SEO requires a more long-term approach. SEO also requires more time and expertise, while PPC can be implemented relatively quickly and require less expertise.

SEO’s main advantage is, of course, that each click is free, while PPC ads require a budget. Also, organic search traffic tends to have higher conversion rates than PPC traffic.