The Pay Per Click(PPC) model is an online advertising model in which an advertiser pays a publisher each time an advertisement link is clicked. For PPC advertising, Google Adwords, Facebook Ads, and Twitter Ads are the most popular platforms.
How the Pay Per Click Model Works
Keywords are the most critical part of the pay-per-click model. Search engines, for example, show online ads (also referred to as sponsored links) only when people search for keywords relevant to a product or service. Pay-per-click advertising companies, therefore, research and analyze the keywords most related to their products or services. By investing in relevant keywords, you can increase the number of clicks and, eventually, your profits.
Publishers and advertisers both benefit from the PPC model. Advertisers benefit from the model because it allows them to target an audience that is actively searching for relevant content. The value of a click from a potential customer outweighs the cost of the click paid to the publisher in a well-designed PPC advertising campaign.
The Pay Per Click model is the primary source of revenue for publishers. Consider Google and Facebook, which provide free services to their customers (such as web searches and social networking). With the help of online advertising, particularly PPC, online companies can monetize their free products.
Pay Per Click Models
A flat-rate or bid-based model is commonly used to determine Pay Per Click advertising rates.
1. Flat-rate model
Advertisers pay publishers a fixed fee for each click in the flat rate pay-per-click model. Generally, publishers keep a list of different Pay Per Click rates for different parts of their websites. It is important to note that publishers are generally open to negotiating the price. If an advertiser offers a long-term or high-value contract, the publisher is likely to lower the fixed price.
2. Bid-based model
Adverts make bids based on the maximum amount they are willing to pay for an advertising spot in the bid-based model. An auction is then conducted by a publisher using automated tools. Every time an ad spot is triggered by a visitor, an auction is run.
An auction’s winner is generally determined by the rank, not the total amount bid. In order to rank an advertiser, both the amount of money offered and the quality of the content offered are taken into consideration. As critical as the bid is the relevance of the content.
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