Pay-per-click involves an organisation paying for advertising when an advertisement link is clicked. The pay-per-click model is usually offered by search engines such as Google or social media sites such as Facebook and Twitter. When a customer uses a search engine by entering keywords they are presented with two types of links – inorganic (pay-per-click) and organic links. The paid advertisement (sponsored inorganic links) are displayed at the top of the search page.
Search engine Google has a complex algorithm to determine which paid advertisements appear on a search page and in what order. Google allows organisations to purchase spots on the Search Engine Results Page (SERP) as a sponsored listing. Google displays sponsored listings based on the keywords in the search, the customer’s previous search history, and bidding . The customer can set a monthly budget, when to pay, bidding options, Bidding options are based on the advertising goals of the advertiser which could be sales, visits, brand awareness, views.
Some factors in determining which advertisements appear and in what order are:
- The bid price from the advertiser – the highest price does not necessarily make the top spot on the advertisers list.
- Relevance – the web pages listed on the search page matches the search keywords and customer history.
- Quality of advertisement and quality score – advertisements with bad history have lower priority
- Platform – some advertisements are more suited to specific platforms.
- Advertisement formats and extensions – additional features such as links, phone numbers and ratings may affect ranking
Pay-per-click uses keywords to match an advertisement to a customer that is actively searching for matching content. The search engine gets revenue from the advertiser when the customer clicks on an advertisement . The advertiser gains from pay-per-click when the revenue achieved from sales derived from the clicks exceeds the overall cost of the clicks. Google and other search engines aim to get the highest revenue and use algorithms to select the best most-productive advertisements. The algorithm may select a lower bid price advertisement for higher quality and more relevant keyword matching when the advertisement is more likely to result in a sale.
References
Björnfot, Q., & Dehlin, M. (2023). Comparing the Return on Investment of Search Engine Optimization and Pay-Per-Click marketing: Developing a model to forecast the ROI of SEO based on the SOSTAC Planning System. https://www.diva-portal.org/smash/get/diva2:1799554/FULLTEXT01.pdf.
Search Engine Land. (2024, February 2). How the PPC ad auction works. https://searchengineland.com/guide/ppc/how-the-ppc-ad-auction-works#:~:text=Here’s%20an%20overview%20of%20how,the%20ad%20copy%20and%20design).