How PPC advertising works?

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How PPC advertising works?

In early pay-per-click programs, the retailer ranking of sponsored listings was typically based on the highest bidded cost-per-click for each keyword phrase. So it was a pure auction arrangement with the cost-per-click dependent on the balance of the extent of competition in the marketplace against the revenue or profit that can be generated dependent on conversion rates to sale and retention.

Today, it is not necessarily the company which is prepared to pay the most per click who will get the top spot. The search engines also take relative click-through rates of the ads dependent on their position (lower position naturally have lower click through rates) into account when ranking the sponsored links. Ads which do not appear relevant, because fewer people are clicking on them, will drop down or may even disappear off the listing. The analysis of CTR to determine position is part of the quality score, a concept originally developed by Google but now integrated as part of Microsoft Bing and Yahoo! search networks.

How does paid search advertising work?

When a user enters a search query into the search engine, the engine returns a list of organic search results. It also determines which ads to show that are relevant to search query. These ads, which sit adjacent to or above the organic listings, used to be small, unobtrusive text-based ads, but now may come with enhanced listings that include images and other data such as price and merchant name. While high ranking in the organic listing is the ideal that most webmasters are striving for, optimising a page to rank in organic search results can be difficult, and getting a consistency high and sustainable raking takes a substantial amount of effort and a lot of time. Marketers are striving for organic listings because it’s free and because users can see organic results as impartial: they trust, and therefore click on, organic listings in preference to paid ads.

Time without traffic is a missed opportunity for your online business. That’s where paid search advertising comes in. By agreeing to pay the search engines a fee per click for your ads to show up as sponsored result when a user types in your chosen keywords, you can put your site in front of your prospect in the SERPs almost immediately. When the user clicks on one of your ads, you get a new visitor and the search engine bills you for the click.

PPC keywords are bid on by advertisers in an auction-style system: generally the higher the bid per click, the higher the ad’s placement in the SERPs. Most PPC systems also employ a ‘quality’ quotient into their ad placement rankings, based on the popularity of the ad (its click-through rate, or CTR) and the perceived quality of both the ad content and the landing page it points to (e.g. Google AdWords Quality Score).

The quality score

Understanding the quality score is key to successful paid search marketing. You should consider its implications when you structure the account and write copy. Google developed the quality score because they understood that delivering relevance through the sponsored links was essential to their user’s experience, and their profits. In their AdWords help system they explain:

The AdWords system works best for everybody: advertisers, users, publishers and Google too when the ads we display match our users’ needs as closely as possible. We call this idea ‘relevance’.

We measure relevance in simple way: typically, the higher the ad’s quality score, the more relevant it is for the keywords to which it is tied. When your ads are highly relevant, they tend to earn more clicks, more higher in Ad Rank and bring the most success.

A summary formula for the Google quality score is:

Quality score: (keyword click-through rate, ad text relevance, keyword relevance, landing page relevance and other methods of assessing relevance)

So higher click-through rates achieved through better targeted creative core are rewarded as is relevance of the landing page (Google now send out AdBots-Google to check them out). More relevant ads are also rewarded through ad text relevance, which is an assessment of the match of headline and description to the search term. Finally, the keyword relevance is the match of the triggering keyword to the search term entered.

If you have ever wondered why the number of paid ads above the natural listings varies from none to three, then it’s down to the quality score – you can only get the coveted positions for keywords which have a sufficiently high quality score – you can’t ‘buy your way to the top’ as many think.

Chaffey, D. and Ellis-Chadwick, F., 2012. Digital marketing: strategy, implementation and practice (Vol. 5). Harlow: Pearson.

Ryan, D., 2016. Understanding digital marketing: marketing strategies for engaging the digital generation. Kogan Page Publishers.

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