3.4 Pay-Per-Click Advertising

Pay-per-click (PPC) advertising is an advertising system where the advertisers pay only for each click on their advertisements. While it is most often used as an advertising system offered by search engines, it can also be used for banner advertising (where the advertiser pays for clicks on the advertisement instead of impressions). PPC is also the system on which many shopping engines and directories are based. Sometimes, PPC advertising on search engines is referred to as paid search. PPC advertising revolutionized the online advertising industry. The focus of this section will be on paid-search advertising, that is, PPC advertising provided by search engines, but we will touch briefly on other advertising systems based on PPC. PPC advertisements on search engines are easy to spot—they’re the results listed as “sponsored links.” They can appear at the top of the results page, usually in a box, and on the right-hand side of the results page.

PPC advertising is keyword-based, which is based on the search term that a user enters into a search engine. A search term can have one word or be made up of many words. Sometimes a multiword search term is referred to as a key phrase.  Advertisers target those keywords for which they want their advertisement to appear. For the advertiser, the beauty of PPC advertising on search engines is that their advertisements are displayed when potential customers have already expressed intent—they are searching for a product or service. It allows advertisers to present their offering to a potential customer already in the buying cycle.

History

Search engines display results to search queries based on proprietary algorithms. Each major search engine uses its own formula to determine what results to show for any term. In 1996, the Open Text Index search engine began allowing websites to pay for a preferred ranking in selected results pages, to mixed responses from business owners and other search engines. However, this was pay for placement, not that different from paid inclusion, where advertisers were paying to appear in the search results, whether or not a user clicked through to their site.

In February 1998, GoTo.com was launched. This new search engine allowed website owners to bid for placement in the search results pages for specific search terms. Results were ranked according to how much the Web site owners were willing to bid, with the highest bid appearing at the top of the page. The Web site owner would only pay for each click, as opposed to for appearing on the results page. By July 1998, advertisers paid up to a dollar for each click! GoTo.com changed its name to Overture Services, Inc., in 2001 and was acquired by Yahoo! in 2003. GoTo.com partnered with Yahoo! and MSN portals to monetize their search queries.

Overture successfully patented their PPC mechanism for search engines (“system and method for influencing a position on a search result list generated by a computer network search engine” was patented in 2001) and has since then pursued, successfully, lawsuits against other PPC providers, including Google.  Overture initiated infringement proceedings under this patent in 2002 and settled with Google after Yahoo had acquired it! Google agreed to issue 2.7 million shares of common stock to Yahoo! in exchange for a perpetual license (Forbes, 2004).

How It Works

Search engines have pay-per-click (PPC) advertising; for instance, Google has AdWords. While the basic process remains the same for each one, some differences exist.

With PPC advertising, the advertiser does the following:

• Creates the content for an advertisement
• Select the keywords. This is a word found within a search query. For example, searching for “blue widgets” includes the keywords “blue” and “widgets.” for which that advertisement should appear
• Chooses the maximum amount they are willing to pay for a click on the advertisement (this amount can be unique to each keyword they have selected for an advertisement)

The search engine algorithm does the following:

• Check the advertisement for compliance with editorial guidelines
• Advertises relevant search queries
• Determines the rank, or position, of the advertisement based on the advertiser’s maximum bid and the relevance of the advertisement (which includes factors such as click-through rate [CTR], ad copy, keywords, and landing-page relevance to the search)

Search and Content Networks

Advertisers can choose to display their advertisements on the search network only (which means on search engines), or they can select to have the advertisements displayed on the content network. The search network will include the search engine that owns the platform (Google for AdWords) and other search engines for which that platform provides paid results (e.g., currently, Ask.com uses the AdWords platform for paid results).

The content network refers to websites other than search engines displaying PPC advertisements. For Google AdWords, these are the websites and blogs that have joined Google AdSense, Google’s publishers’ platform. Google determines the content of the website and then displays appropriate PPC advertisements. The CPC (cost per click) for text ads is lower than on the search network, but the CTR and conversion rate can be much lower. The Google content network also allows image, video, and mobile ads.

What Makes Up a PPC Advertisement?

Text PPC advertisements follow the same basic structure:

• Heading
• Two lines of advertisement copy,
• Which can be displayed on one line
• www.DisplayURL.com

The URL (uniform resource locator) shown is not necessarily the URL that the user will click through to. When writing the copy, these are known as the display URL (what is shown on the advertisement) and the destination URL (what the actual URL of the page is). The display URL is sometimes also called a vanity URL. The aim should be to send users to a web page that is specific to their search and a PPC advertisement. This is known as deep linking. Make a hyperlink that points to a particular page or image on another website instead of that Website’s main or home page.

Which Platform Should I Choose?

There is some theory that different platforms are better for various industries. Most large advertisers will run PPC campaigns on several platforms. As with most things in eMarketing, it is all about testing. There are some slight differences with each platform regarding editorial policy, and each system has a different user interface. Google AdWords, perhaps the most well-known, allows users to transact in the currency of their choice and also offers training programs and certifications. Google AdWords also currently has the best geotargeting worldwide, although geotargeting is offered by both Microsoft adCenter and Yahoo! Search Marketing.

The Long Tail

Google has estimated that 50 percent of searches are unique. This means that the sum of unique searches is about the same as the sum of nonunique searches. Looking a little more closely at search terms will show a small number of high-volume searches and then a large number of lower-volume searches stretching out to those unique searches.

In the long tail, the sum of the low-volume searches matches the high-volume searches.

This is sometimes referred to as the long tail of search. Those low-volume, niche search terms can do wonders for a PPC campaign. Generally, there is not much competition for those search terms, and the search terms themselves are very targeted.