Purpose and Construction of Pay-per-click
– Assess cost-effectiveness and profitability of internet marketing
– Drive the cost of running an advertisement campaign as low as possible
– Retain set goals
– Measure attention and interest through clicks
– Preferred metric for generating clicks and driving traffic
– Cost-per-click (CPC) calculated by dividing advertising cost by clicks generated
– Two primary models: flat-rate and bid-based
– Consider potential value of a click from a given source
– Targeting is key in PPC campaigns
– Factors influencing PPC campaigns include interests, intent, location, device, and time
Flat-rate and Bid-based PPC
– Flat-rate PPC:
– Advertiser and publisher agree upon a fixed amount for each click
– Rates often related to the content on pages
– Negotiation for lower rates possible
– Common on comparison shopping engines
– High degree of targeting by advertisers in specific categories
– Bid-based PPC:
– Advertisers compete in private auctions hosted by publishers or advertising networks
– Advertisers indicate maximum amount willing to pay for an ad spot
– Real-time bidding (RTB) occurs for each triggered ad spot
– Multiple winners possible for multiple ad spots
– Ad rank determined by bid and Quality Score
Contextual Ads in Pay-per-click
– Contextual ads placed on 3rd-party properties through advertising networks
– Publishers receive a portion of ad revenue generated
– Lower click-through rate and conversion rate compared to ads on search engine results pages (SERPs)
– Content network properties include websites, newsletters, and emails
– Advertisers pay for every click received, based on the bid amount
History and Statistics of Pay-per-click
– History:
– Several sites claim to be the first PPC model on the web, appearing in the mid-1990s.
– In 1996, the first known PPC was included in a web directory called Planet Oasis.
– By the end of 1997, over 400 major brands were paying between $.005 to $.25 per click.
– In February 1998, Jeffrey Brewer of Goto.com presented a pay per click search engine proof-of-concept.
– Google started search engine advertising in December 1999 and introduced AdWords in October 2000.
– Statistics:
– Customers are 50% more likely to purchase something after clicking a paid ad.
– SMEs spend $108,000 to $120,000 annually on PPC ads.
– 57.5% of users don’t recognize paid ads when they see them.
– Click bots and fake traffic cost online advertisers $35 billion.
– In 2014, PPC (AdWords) attributed approximately US$45 billion of Google’s annual revenue.
Click Fraud and Legal Issues
– Click Fraud:
– Click fraud takes two forms: publishers illegitimately clicking on or fraudulently generating clicks on adverts and advertisers attempting to derail competitors’ adverts.
– In 2018, the FBI cracked down on an illegal ad fraud scheme known as 3ve.
– Ad fraud annual revenue was estimated to be worth more than the illicit drug trade.
– The FBI partnered with Google and other major industry ad platforms to combat click fraud.
– Legal Issues:
– In 2012, Google was initially ruled to have engaged in misleading and deceptive conduct.
– The ruling was later overturned when Google appealed to the High Court of Australia.
– Google was found not liable for the misleading advertisements run through AdWords.
– The case highlighted the extent of ad fraud, with over $19 billion estimated to have been stolen by click fraudsters.
– The Google Ads platforms claim to be able to identify invalid clicks.
Pay-per-click (PPC) is an internet advertising model used to drive traffic to websites, in which an advertiser pays a publisher (typically a search engine, website owner, or a network of websites) when the ad is clicked.
Pay-per-click is usually associated with first-tier search engines (such as Google Ads, Amazon Advertising, and Microsoft Advertising formerly Bing Ads). With search engines, advertisers typically bid on keyword phrases relevant to their target market and pay when ads (text-based search ads or shopping ads that are a combination of images and text) are clicked. In contrast, content sites commonly charge a fixed price per click rather than use a bidding system. PPC display advertisements, also known as banner ads, are shown on websites with related content that have agreed to show ads and are typically not pay-per-click advertising, but instead, usually charge on a cost per thousand impressions (CPM). Social networks such as Facebook, Instagram, LinkedIn, Reddit, Pinterest, TikTok, and Twitter have also adopted pay-per-click as one of their advertising models. The amount advertisers pay depends on the publisher and is usually driven by two major factors: the quality of the ad, and the maximum bid the advertiser is willing to pay per click measured against its competitors' bids. In general, the higher the quality of the ad, the lower the cost per click is charged, and vice versa.
However, websites can offer PPC ads. Websites that utilize PPC ads will display an advertisement when a query (keyword or phrase) matches an advertiser's keyword list that has been added in different ad groups, or when a content site displays relevant content. Such advertisements are called sponsored links or sponsored ads, and appear adjacent to, above, or beneath organic results on search engine results pages (SERP), or anywhere a web developer chooses on a content site.
The PPC advertising model is open to abuse through click fraud, although Google and others have implemented automated systems to guard against abusive clicks by competitors or corrupt web developers.
