Pay-Per-Click (PPC) Advertising Part 1 – What is Pay-Per-Click Advertising & Why Should You Use It?

Part 1 – What is pay-per-click advertising?

Fundamentally speaking, pay-per-click advertising is a form of online advertising where an advertiser is charged when their ad receives a click after appearing in search engine results pages, rather than paying for an ad impression, or when the ad is shown or seen.

Digital marketing and advertising is notorious for having its own language and agencies tend to try and create their own terms in an attempt to stand out from the competition; for example the terms “retargeting” and “remarketing” essentially mean the same thing.  Cost per click (CPC) refers to the amount, or cost, an advertiser pays each time their ad is clicked on. The advertiser sets a bid price called the Max CPC and the price the advertiser pays is the Avg CPC. CPM, on the other hand, or cost-per-thousand, is the marketing term for buying per 1,000 impressions, wherein ads are purchased on a cost-per-thousand basis and advertisers pay when their ads are shown in search engine results pages.

To a certain degree, search advertising has been coined as PPC since it was introduced by search engines and has since been adopted by a variety of different sites, such as Amazon, Facebook, LinkedIn, and others. These sites offer advertisers the option to purchase social, video and display ads, to name a few.

In this three-part series, the focus is specifically on the paid search area of PPC where text ads appear in search engine results. While the three major search engines, whether it be Google, Yahoo or Bing, each has its own, individual options for advertising, this series will specifically target Google. Google is the goliath of the search industry, constantly updating and innovating to remain the top contender in the world of search.

Why PPC advertising?

While PPC has developed immensely over time, there are still many reasons companies, large and small, spend billions of dollars a year on this keystone of search advertising.

Pay-Per-Click Advertising Provides Immediate Results

PPC advertising delivers instantly. As soon as your campaign is approved, your ads can be seen by millions of searchers. The ability to create and implement a campaign and reach a target audience so quickly makes PPC an optimal choice for contributing to business goals.  Examples could be brand exposure and recognition, product launches, event marketing, seasonal promotions and more.

PPC Is Measurable & Trackable

Everything about PPC is measurable and trackable.  Google Adwords reporting features include high-level details about impressions, clicks, and conversions. When it comes to the performance of your PPC campaigns, Google Adwords provides real-time statistics, including the type of traffic and how those results are influencing your budget.  PPC’s measuring and tracking capabilities make it a valuable tool for experimenting with different variables, such as campaigns, landing pages and strategies. Pay-per-click advertising allows you to better understand specifically what your target audience is searching for as well as what you spent and what drove that spend in terms of your end goals.

PPC Targeting Options

The beauty of targeting options through pay-per-click advertising is reaching an audience you may not have known you had as well as those who may already be exposed to your brand.  Google Adwords targeting options include, but are not limited to:

Audience Targeting


Target based on age, gender, location and even device types. Let’s say you are a small yoga studio promoting a new class best suited for women between the ages of 25 and 45 and you know your current client base doesn’t travel more than 20 miles to your studio: your ads will be delivered to users matching these demographics.


Target based on similar interests to your existing audience. These targets may not be precisely searching for your company’s product or service, but by targeting based on similar interests, their searches may place them in front of your ads.  Using the same yoga studio as an example, you may include pilates, zumba, physical fitness, etc. as similar interests.


Target based on visitors who have already been engaged with your website, app or ads so your ads will be placed more frequently in front of these individuals. They may be in any stage of the buying process, but if they have visited your website, landing page or clicked on your ad before, it’s likely they will return and perhaps to complete a purchase.

Content Targeting


PPC placement targeting is essentially an online auction.  Advertisers can choose managed placement, or choosing only specific sites they wish their display ads to be shown; or automatic placement, when sites are chosen for you based on the targeting you have set. The biggest difference with placement targeting is it is not reliant on keyword selection like contextual targeting.

Display Expansion for Search:

Display Expansion can be used in search or display ads.  Adwords will find your ideal target on your behalf, combining automatic bidding and smart targeting, while targeting high-traffic occasions to deliver you the most optimal results.

Content Keywords:

By choosing content keywords relevant to your business’ products and services, you target individuals performing searches using that same search criteria. You can also modify a group of keywords in order to manually target specific demographics or reach certain business goals. For example, you can tailor your keywords to market a new product or service or to promote an upcoming event.

Where do PPC ads appear?

While in this series the focus is on traditional text ads, it’s worth sharing the other ad formats you may see in search engine results pages. The following illustrate how and where the different ad types would appear on Google:

PPC Text Ads:

These can appear at the top or the bottom of the organic search results on desktop or mobile devices.  Note there are only four spots for ads to potentially appear above the search results. Ads can also appear in the local pack of listings with a map; this data is pulled from Google My Business.

Source: Google Ads

Local Ads:

Local Ads appear in the local pack of listings and Google Maps for businesses with physical locations.  The green pins indicate a business with an ad and when a user hovers over it, an Ad label appears.

example of local Google ad
Source: Google Ads

Shopping Ads:

Shopping Ads, or as Google calls them, Product Listing Ads (PLA) are delivered differently than text ads.  They are image-based ads and include the company name, price, any current offers, and more. Shopping ads are not based on keywords, but rather on data Google collects from the Merchant Center, set up by the merchant, enabling Google to deliver higher quality leads.  For instance, if someone were to search for “mouse pad”, they would know what they look like right away because of the pictures shown and what the cost of each is before even clicking on the ad. After clicking the ad and being directed to the website, this prospect is already further along the purchasing path. The ads are shown at the top of the search results page in a carousel on desktop and mobile devices; they are shown on the right side in what Google calls a knowledge card or graph.  Here is an example of the previous search for “mouse pad” showing both appearances:

example of mouse pad shopping ads

How does PPC work?

Search engine results don’t necessarily display ads for every search query, but if that query results in a potential profit, an “auction” begins at the onset of the search.  A couple of different considerations go into determining whether or not an ad is qualified to appear in the auction, what order the qualified ads will show and the amount each ad will be charged should a user click on it.

First, advertisers set the maximum bid (Max CPC) or the most they want to pay for a click. These bids can be on an individual keyword basis or applied to an entire Ad Group. Next, an ad is assigned a Quality Score (explained in further detail below).  Once an ad is qualified to enter the auction, an Ad Rank (also explained in further detail below) is calculated by multiplying different variables of the Max CPC by the Quality Score, which is then the ultimate decider what position the ad falls in.

Quality Score:

The Quality Score refers to Google’s rating of the quality and relevance of your ad copy and keywords.  Although advertisers don’t see what their Quality Score is, they can see a ranking between 1 (bad) and 10 (excellent) within the Adwords platform.  With a higher quality score, your ads may get a lower cost-per-click (CPC) or appear higher in an auction. When calculating your Quality Score, Google looks at the odds of your ad being clicked on, the correlation between the search query related to your ad copy and the landing page to which the user is directed; does that landing page provide the user with what they searched for in the first place?

Ad Rank:

Ad Rank refers to the positioning of an ad relative to other ads shown in the same auction.  As mentioned above, it is calculated based on the Max CPC and Quality Score. Essentially, the formula would look like this:

Max CPC x Quality Score + other details, such as the terms used in the search query, what device the search is made on, the influence ad extensions may possibly have, and more.


Cost-per-click (CPC) is affected largely by Ad Rank with its formula looking like this:

CPC = The Ad Rank of the Advertiser Below/Quality Score + $0.01

This isn’t to say the advertiser below should bid $0.01 more; this is just part of Google’s secret sauce, to say.  CPC’s will fluctuate a great deal since Adwords pricing structure is partly due to the Ad Rank of the next competitor.


While the Why, Where and How of PPC may seem a bit daunting, it goes without saying pay-per-click advertising can be a very beneficial and cost-effective method of advertising for businesses, large and small.  Join in on Part 2 of this series to read about what you need to get started, more grueling details on measurement and tracking and guidance on setting up an account.

Read More:

Part 2: Pay-Per-Click Advertising Setup

Part 3: Tips & Everything Else You Need to Know


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Kristy is an Assistant & Coordinator of Awesome. She has worked extensively in academic administration and brings a varied wealth of knowledge. As a self-starter, she is ready to take on news projects and see them through to completion. Always curious, Kristy is an avid researcher and delights in the challenge of learning new skills.

When Kristy isn’t organizing or researching something, you can find her listening to a true crime podcast, re-watching How I Met Your Mother or The Big Bang Theory and coming up with some crazy shenanigan for her family’s next adventure.


  1. Kristy prefers the Harry Potter books over the movies. Her favorite book is The Prisoner of Azkaban and her favorite character is Luna Lovegood. Ravenclaw house. She just started her 8-year-old son on listening to the books.
  2. Kristy has a nail technician license, esthetician license, medical assisting certification, associate degree, and bachelor’s degree. She didn’t get her full cosmetology license because she can barely do her own hair, she shouldn’t be trusted with someone else’s.
  3. She doesn’t know how to gamble but is originally from Las Vegas, Nevada. She moved to Colorado three months before her 21st birthday.
  4. Her high school graduating class consisted of only 20 people.
  5. Kristy loves gift giving. One of her great joys in life is finding the “perfect” gift.
Kristy Elias