Understanding Pay Per Click Advertising

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Advertisers spend millions of dollars every year trying to reach their potential customers. The internet has revolutionized the way businesses can reach potential customers and the concept of ‘pay per click’ (ppc) advertising is a huge part of internet marketing.

When the internet first started gaining popularity and the number of websites grew, online advertising was generally limited to the concept of a business paying X number of dollars to place a set ad or ad banner on a website. The owner of the website received payment to place the ad on the page. While the agreement might allow the advertiser to place the ad where they want on the site, the business paid for the set amount for the ad whether or not anyone actually clicked on the ad to look at what it was selling, let alone buy anything through the ad.

Price of ad placement was mainly determined by the amount of traffic the site drew; high traffic sites could command a higher ad rate. While this method still exists today, the concept of pay per click advertising is one of the most popular forms of online advertising due to it’s excellent value and excellent ad placement with relevant content.

Many people credit Google with revolutionizing online advertising by introducing Google Adsense in 1999. The system used Google’s existing growing web crawling system that searched the web for keywords relevant to user searches and applied it to placing relevant ads along with content related to it. For example a business that sold car parts could now submit keywords relevant to their product to Google along with their ad (such as car repair, mechanics, motor oil, etc).

AdSense took it further by not only allowing their search engines to place relevant ads with content that was similar to what the ad was selling, but by giving the businesses with the ads more value for their money. This is where the pay per click term got it’s meaning from. Advertisers don’t pay a set rate to have their ads appear with content matching their keyword (although they can pay extra to have their websites show up as sponsored search results), rather they only pay Google when someone actually clicks on their ads. This means the business will get exposure without paying anything, and only pay when someone clicks on their ads.

By only paying when a person clicks on the ad, it is extremely cost effective, plus the whole goal of online ads is to in fact get a user to click the ad and hopefully buy whatever is being sold there. Adsense has also allowed webmasters to profit from ad placements. Owners of websites can sign up for Adsense and place relevant ads all over their site. Whenever an ad is clicked the ad owner pays Adsense and in turn a portion of that transaction is given to the website owner where the ad is located.

Pay per click ads have helped thousands of websites thrive on ad revenue alone; many sites such as MySpace exist mostly on ad revenue generated through their membership in the Google Adsense program. Before pay per click companies could spend thousands promoting themselves online and not have a clue if they were making any money through those ads. Now they can track where a click through was initiated, adjust their keywords to maximize exposure, and reach customers while only paying for those who click the ad. For webmasters and website owners, they can make money through their ad programs which as allowed many sites to over services 100% free to their customers while those users only see ads that may interest them.

Basically the PPC concept of advertising online has completely changed the online marketing game and allows everyone from internet users and website owners to web start ups and businesses advertising online to win.