Pay Per Click Advertising
Pay Per Click Advertising
Let us try to understand what exactly Pay per Click Advertising concept is?
Click is something related to the action of opening the content in context of Internet. By Click action on the URL, website/blog or related content will get open on the internet. Total number of Internet users in the world is 3.49 billion. Considering the total population on the Earth to be 8.5 billion, the percentage of population on the Earth using the Internet on the Earth turns out to be 41% which is big count! This arise the potential opportunity to do marketing of various products / Services to these massive users to gain Business out of it. Keyword Advertisement refers to the marketing of products and services by displaying ads with the primary intension of selling products and services to gain business.
Thus, doing advertising over the websites of internet, whose cost is charged on per click basis and thereby advertiser would require to pay per click charges multiply by the number of clicks done on that advertise by the various users of the website on which ad is being displayed is called Pay Per Click Advertising.
Where is this kind of Pay per click advertising offered on the Internet?
Pay per click advertising is offered by various search engines, website owner, or a network of websites on the Internet which has mostly large number of users. Let us try to understand the users doing daily searches on various popular search engines:
Google (www.google.com) – 5.6 billion searches per day
Bing (www.bing.com) – 122.8 million searches per day
Baidu (www.baidu.com) – 3.3 billion searches per day
Thus, search engines are one of the mostpopular websites for advertisers to advertise their content to the massive users of it.
What are the examples of various search engine portal for doing advertising on it charged by Pay per click method?
Google AdWords-(https://ads.google.com)
Bing Ads-(ads.microsoft.com)
Yahoo Search Ads-
How do search engine calculates the charges based on Pay per Click model for doing advertising on it? How much is the charge of doing advertising on any popular search engines?
Let us try to understand by taking an example of popular search engine Google.
Google uses Ad Auction method for determining the charges per click done on the advertise by its users for displaying ads from various advertiser on its search engine. When users will enter text in to the search box to be search for, Google will determine whether that Text contains keywords that advertisers are currently bidding. If advertisers have bided on some of the keywords in the Text, then the Ad auction begins.
The purpose of the Ad auction is to determine Ad Rank to know as to where each ad will be positioned in search engine results page. Advertisers will bid on the specific keywords. To have proper positioning of ads from various advertisers, Google gives Rank to each advertiser ads based on CPC Bid and Quality score as explained below:
AD Rank = CPC Bid x Quality Score. Quality score is metric used by google to determine how relevant and useful the ad is to the user. Higher the relevancy of the content and usefulness to the user, higher will be the Quality score of that ads.
Below is the example of calculation of Ad Ranks based on Bid Amount and Quality score of advertisers:
Advertiser Position
|
Maximum Bid Amount
|
Quality Score
|
Ad Rank
|
Advertiser 1
|
$2
|
10
|
20
|
Advertiser 2
|
$3
|
5
|
15
|
Advertiser 3
|
$4
|
3
|
12
|
Advertiser 4
|
$5
|
2
|
10
|
Advertiser 5
|
$6
|
1
|
6
|
Thus, based on the two factors, advertisers are given rank of displaying their ads.
Does it mean that advertisers will require to pay Max Bid per click?
No. Advertisers have to pay based on the Cost per Click (CPC) calculation done by the following formula:
Cost Per Click (CPC) = Ad Rank of the Advertiser below / Quality score + $ 0.01
Let us try to understand how much will advertiser 1,2 and 3 requires to pay.
Advertiser 1 CPC = 15/10 + $0.01 = $1.51
Advertiser 2 CPC = 12/5 + $0.01 = $2.41
Advertiser 3 CPC = 10/3 + $0.01 = $3.34
Thus, based on number of click done by users of search engine displaying the advertisers ads, Advertiser will be charged by the Google. For example, Advertiser 1 will be charged maximum $151 for 100 clicks ($1.51 x 100 =$151).
What does keyword mean in the context of search engine? How much is average cost per click for popular keywords for which advertiser is charged on Pay Per Click method?
Search engine is basically the computer algorithm. And so, when users put any Text in the search box of search engine website, various important words from the text entered will be searched by search engine in various websites to determine websites containing the matching words. After finding the most relevant websites based on its data analysis algorithm, it will display them in the form of search results. Let us try to understand by an illustration.
Assume that user has enter the Text “What is currency?” in the search engine. This text is containing ‘What’, ‘is’ and ‘currency’ as the words. Out of this important word is ‘Currency’ which is called keyword in context of search engine. Search engine will search this keyword in various websites throughout the world, determine the websites having this keyword and thereby based on its relevancy display various websites in the form of search results. Thus, keyword play an important role in search engine. Higher the search for a keyword, higher will be the number of users and so higher will be the advertisement cost for that keyword
To understand that, below is the table having popular keywords by industry and their average cost per click in 2019 in google:
Advertiser Position
|
Maximum Bid Amount
|
Quality Score
|
Ad Rank
|
Advertiser 1
|
$2
|
10
|
20
|
Advertiser 2
|
$3
|
5
|
15
|
Advertiser 3
|
$4
|
3
|
12
|
Advertiser 4
|
$5
|
2
|
10
|
Advertiser 5
|
$6
|
1
|
6
|
Thus we have understood the concept of Pay per click advertising in context of Internet, realize the importance of doing advertising on the internet because of the massive usage of it accounting to 41% of total population on the earth and had thereby understood the Ad auction method followed by popular search engine to evaluate rank and cost per click of the advertise on its website.
