How Does Pay-Per-Click (PPC) Advertising Work?

When researching ways to promote your business online, you’ll probably come across pay-per-click (PPC) advertising. According to Social Media Today, businesses spent over $10 billion, collectively, on PPC advertising last year. It’s become so popular, in fact, that many businesses base their entire marketing strategy around it. Before launching your first PPC campaign, though, you might be wondering how it works.

What Is PPC Advertising?

Also known as cost-per-click (CPC) advertising, PPC advertising involves purchasing online ads through a PPC network for which you are charged per click. You aren’t charged for creating ads, nor are charged for displaying them. Rather, PPC networks only charge you when a user clicks one of your ads. If 500 users see your ads, but of none of them click your ads, you won’t be charged.

Some of the most popular PPC networks include:

  • Google Ads (formerly known as AdWords)
  • Bing Ads (formerly known as Microsoft adCenter)
  • Facebook Ads
  • Bidvertiser
  • AdRoll
  • RevContent
  • Clicksor
  • LinkedIn Ads
  • Twitter Ads
  • Pinterest Ads

The Basics of PPC Advertising and How It Works

The way in which PPC advertising works varies depending on the PPC network. All PPC networks use the same characteristic payment model in which you are charged per click. However, on most PPC networks, including Google Ads and Facebook Ads, you’ll place a maximum CPC bid. When a user clicks one of your ads, you’ll be charged either the equivalent of or less than your maximum CPC bid.

There’s a strong incentive to raise your maximum CPC bids. The visibility of a PPC ad is heavily influenced by its maximum CPC bid. The higher the maximum CPC bid, the higher the ad will rank on the respective PPC network’s website or affiliated properties. All PPC networks have a finite amount of digital real estate, so the display of ads based on their maximum CPC bid.

On Google Ads, for example, an ad with a $3 maximum CPC bid may rank at the top of the search results, whereas an ad with a 50 cent maximum CPC bid may rank at the bottom of the search results. Depending on the competition, Google may push ads with a low maximum CPC several pages deep.

It’s important to note that PPC networks analyze other factors to determine where an ad should rank. In addition to maximum CPC bid, Google Ads assesses landing page relevancy and expected click-through (CTR) rate. With that said, you can typically achieve higher ad rankings by raising your maximum CPC bids.

The Benefits of PPC Advertising

Because it involves paying per ad click, PPC advertising is arguably the single most cost-effective way to promote your business online. In the past, most online ads were sold for a flat fee, such as $100 per week or $400 per month. While this flat-fee pricing model is still used, it has largely been replaced by PPC, the latter of which offers greater value for businesses.

PPC advertising uses a performance-based pricing model in which you are charged no more than your maximum CPC bid per ad click. Clicks, of course, drive sales or conversions. If no one clicks your ads, you won’t generate any sales or conversions from those ads. As a result, PPC advertising is a cost-effective way to promote your business online.

All of the leading PPC networks allow you to target specific audiences. In other words, you can specify who, exactly, will see your ads. On Google Ads, you can target users by keyword searches. On Facebook Ads, you can target users by age, gender, location, relationship status, education level, employment, income, residence and more.

PPC advertising is also measurable, meaning you can track the performance of your ads. Using conversion tracking, you can see which ads and keywords are driving conversions and which ones aren’t.

How to Get Started with PPC Advertising

If you’re interested in testing the waters of PPC advertising, you should consider creating a campaign on either Google Ads or Facebook Ads. According to a study conducted by eMarketer, Google Ads is the largest PPC network, accounting for over 38 percent of all digital advertising expenditure in the United States. Facebook Ads is the second-largest PPC network, accounting for nearly 20 percent of all digital advertising expenditure in the United States.

You can access Google Ads at or Facebook Ads at Both of these PPC networks offer a user-friendly interface. Google Ads is often preferred among business owners because it allows for ad placements on Facebook Ads, on the other hand, typically offers low click costs. If you’re struggling to choose between these two PPC networks, you can always create a campaign on both Google Ads and Facebook Ads. Just remember to set a low daily budget.

Tips to Optimize Your PPC Campaigns

Regardless of which PPC network you use, remember to closely monitor your average CPCs. Not to be confused with the maximum CPC bids. Average CPC is the average cost per ad click the PPC network charged you during a given period. If the average CPC for an ad is higher than its average earnings per click (EPC), the ad is essentially costing you money.

The golden rule of PPC advertising is to optimize your campaigns so that your average EPCs are higher than your average CPCs, resulting in profitable campaigns. There are several ways to optimize a PPC campaign, one of which is split testing multiple ad variants. Rather than creating just one ad, for example, you can create three or four ads, each of which being slightly different than the rest. After allowing all three or four ad variants to run for a week or so, you should have enough data to determine which variant performed the best.

You can also optimize your PPC campaigns by targeting smaller and more narrow audiences. If you target a large and generic audience with your ads, you’ll probably attract a lot of clicks, but you can expect low conversion rates. Targeting smaller and more narrow audiences, on the other hand, allows for fewer clicks but higher conversion rates.

PPC advertising may sound confusing, but it’s relatively easy once you’ve familiarized yourself with the respective PPC network’s interface. You create ads, set maximum CPC bids and choose the audience whom you wish to target.