How PPC advertising works

PPC advertising is a web-marketing tool that involves the use of keywords and phrases in small two- to three-liner text advertisements. The best way to explain how Pay per Click advertising program works would be with an example:

• Open Google.com or Yahoo.com
• Enter a search phrase or any word and start the search.
• The results page will open up. Along with the search results you will see some links on the right of the page (and one to two links at the top of the page which will be highlighted) with a couple of lines describing the link, below each link. These links can be described as "sponsored links" or as "sponsor results" in Google and Yahoo, respectively. Other websites may use some other terminology that spells out that these links are advertisements. These sponsored links are PPC advertisements.

So, there are three people involved in this advertising pay per click method- the host which carries the advertisement, the visitor who visits the host website, and the advertiser who advertises on the host website.

In a pay per click web advertising solution, advertisers bid on keywords and phrases. When a surfer searches for a word or a string of words, the search result page will feature the advertisements that have the searched-for-words (or keywords).

The bid amount - ranging from a lowly 1 cent to as high as $ 5 per click - is the maximum amount that an advertiser is willing to pay to the host website when any visitor to that website clicks on his advertisement. The advertiser does not have to pay anything if his advertisement is displayed but not clicked upon.

Of course, there are other advertising PPC solutions such as pay-per-impression and pay-for-ranking which are used along with pay per click, but that is a different matter altogether.

The history of PPC advertising

PPC advertising is not new - it was formulated in the mid-nineties and grew to be massively popular during the crazy dotcom boom that happened around the end-nineties.

In early 2000, this boom exploded and burnt a whole lot of cash, leaving only a handful of survivors. The dotcom bust scythed through the dotcom finances and obviously took its toll on all forms of Internet advertising models, including PPC advertising. Many players brought down their websites and most of the survivors were not willing to pay for advertising as their finances were falling apart.

This was not the only reason why PPC advertisement suffered. PPC advertisement got a bad name even during the dotcom boom when unscrupulous website owners used unfair means to get advertisements on their website clicked so that they could charge a higher amount to their advertisers. In Internet terminology, this is called "click fraud".

The two factors above combined effectively to pull down the popularity of the PPC model. But the model did not fade out.

One company - GoTo.com (the PPC pioneer) - stuck to their guns and continued offering PPC advertising to whoever was interested. GoTo was later rechristened as Overture, and in the year 2003 was taken over by Yahoo.

PPC advertisement then underwent a hibernation process till the second half of 2003. In June that year, Google launched its AdSense solution - which was a marketing name given to PPC advertising. This became the take-off point for the PPC bandwagon. And it has not looked back since. Of course, Google did try to offer its AdWords solution to PPC in the year 2000, but that did not take off until they launched AdSense.

Now, every major search engine is into PPC advertising - Google, Yahoo, Ask, 7Search, Miva, and MSN.

As things stand today, PPC advertising solution rules! Go to any website and you will most likely see a small space with sponsored links placed by many major search engines. Of course, click fraud still rears its ugly head every now and then, but advertisers have learnt to live with it, and technology is being put to use to regulate it effectively if not eliminate it altogether.

PPC advertising is a win-win situation - for the host, for the advertiser, and for the visitor too, as he might come across some meaningful links.

The conclusion is that if the click fraud issue is effectively controlled, PPC advertising will gain higher ground and many more websites will surely go for fee based or free pay per click advertising.