What is PPC and how does paid search marketing work

What is PPC?

How it works?

And, most importantly, how can you make it work for you?

This chapter will introduce you to everything you need to know about the exciting world of paid search marketing: keywords, ads, budgets & bids, ad ranking, targeting, and conversions.

Let’s start with the basics.

What is PPC?

Pay Per Click (PPC) is an advertising model that allows advertisers to place ads on an advertising platform and pay the platform host when they click on their ad.

The purpose of the ad is to direct the user who clicks to the advertiser’s website or app, where the user can perform a useful action such as purchasing a product.

Search engines are popular hosting platforms because they allow advertisers to display ads related to what users are looking for.

Advertising services like Google Ads and Microsoft Ads work with real-time bidding (RTB), where ad inventory is sold through a private automated auction using real-time data.


Continue reading below

How paid search works

Whenever there is an advertising spot on a Search Engine Results Page (SERP), an auction takes place for the keyword instantly.

A combination of several factors, including the amount of the bid and the quality of the ad, determines which winner will appear in first position.

These auctions are what keeps the gears of the PPC moving. They start when someone searches for something on a search engine.

If advertisers want to serve ads that are related to a user’s search query, a bid is triggered based on the keywords the advertisers are bidding on.

The ads that win the auction then appear on the search engine results page.

To participate in these auctions, advertisers use accounts on platforms such as Google Ads to set up their ads and determine where and when they want those ads to appear.

Accounts are divided into campaigns to make it easier to manage and report on different locations, product types, or other useful categorizations.


Continue reading below

The campaigns are then divided into ad groups containing keywords and relevant ads.


Keywords are at the center of PPC, connecting advertisers to users’ search queries.

  • Queries are the actual words that users type into a search engine’s search box to find results.
  • Keywords, on the other hand, are what marketers use to target these users by matching their search queries.

Keywords work as generalized abstractions of a wide range of search queries prone to irregularities such as misspellings.

Depending on the types of keyword matches they use, advertisers may match search queries with varying degrees of accuracy.

For example, advertisers can choose to match keywords exactly with search queries or allow variations such as different word orders, different spellings, or the inclusion of other words.

It is also possible to have negative keywords, which will prevent ads from being triggered by search queries containing these keywords, in order to avoid irrelevant traffic.


In addition to keywords, advertisers should prepare ads in their campaigns.

These are grouped into ad groups that target sets of shared keywords and are organized by common themes.

Ads are what users will see if the auction is successful, so they are essential for success.

They usually contain titles, description lines, and a URL.

On a SERP, they can appear at the top of the results or at the bottom of the page.

It is recommended that you test different versions of the ad content to see what works best.

Services like Google Ads and Microsoft Ads provide features called ad extensions that improve the appearance of ads.

Examples include sitelink extensions, which populate an ad with more links to different pages on a site, and call extensions, which add a phone number to the ad during business hours.

Ad extensions are great because they increase the visibility of ads by making them more appealing to users while communicating more information.

Budgets and offers

To participate in the auction, advertisers must decide how much they are willing to spend on a given keyword.


Continue reading below

This is done using budgets at the campaign level and bidding at the ad group or keyword level.

Budgets are set at the campaign level and can be exceeded daily, but will not be exceeded monthly.

Budgets should be set based on the overall account strategy, but bidding is a more precise way to control spending.

All ad groups must have bids, but keyword-level bids override ad group-level bids.

Many advertisers use automatic bidding strategies.

These allow advertisers to set a specific goal for their campaigns and then have the ad platform determine the most appropriate bid for each auction.

Bidding strategies can be applied to individual campaigns or to a portfolio of multiple campaigns.

Due to the RTB system, the actual amount paid by the advertiser depends on the competitor’s activity and the ranking of the advertisement, not just the maximum bid.

Listing ranking

Winning the auction is more than having the highest bid.

Search engines look at other factors to determine which ads should appear at the top and most valuable place in the SERP.


Continue reading below

Search engines have their own ways of taking other things into account when determining ad rank.

Google, for example, considers:

  • Amount of the auction.
  • Relevance and quality of the advertisement.
  • The context of the search (such as user’s device and time of day).
  • Format impact (for example, if it includes extensions that improve the ad format).

Quality Score is a metric that determines the relevance of the ad.

The components of the quality level are:

  • Historical click-through rate (CTR).
  • The relevance of the keyword to the ad.
  • The relevance of the keyword and the ad to the search query.
  • Quality of the landing page.

The relevance of the ad is absolutely essential; the higher the quality score, the lower the CPC will be.

Search engines penalize advertisers who bid on keywords with a low quality score by rarely showing their ads, even if they have high bids.


Continue reading below

This is why it is very important to have attractive and relevant ad copy that includes high volume keywords.

But the quality of the landing page shouldn’t be overlooked either; ads will appear less often when they link to sites with a poor user experience.

The web page should be relevant to the user, load quickly, and provide an overall smooth user experience.


Choosing the right keywords is what enables advertisers to serve ads to relevant audiences.

But there are other targeting options available to optimize campaigns, including:

  • Device targeting.
  • Geographic targeting.
  • Day and time targeting.
  • Demographic targeting.

In this way, advertisers can target mobile users in the evening, or users under 25 and within a certain radius of a particular location, to optimize the performance of their ads.

These are valuable because different variations of ad copy, for example, may perform better for one group of users than for another.


Continue reading below

By using remarketing tools that allow for more specific advertising messages and adjusted budgets, it may also be possible to target or exclude former visitors to a website who perform follow-up searches.

Bids can be adjusted automatically for keywords based on targeting options, giving advertisers more control over traffic and spending by bidding when customers are more valuable to the business.


The point of all of this hard work isn’t just to get clicks. The real object of the game is to get conversions.

These are the actions advertisers want users to take after clicking on their ad and depend on the type of business being advertised.

Here are some common examples of conversions:

  • The purchase of a service.
  • Subscribe to a newsletter.
  • Make a phone call.
  • And more.

Tracking conversions is critical to knowing how well a PPC campaign is performing and how many conversions can be attributed to paid search rather than other marketing channels.


Continue reading below

Platforms like Google Ads can track conversions using a snippet placed in the source code of the conversion page (which is reached after the conversion, such as a thank you page) to collect data conversion.

Conversion tracking can be tricky because conversion paths also tend to be more complicated than just clicking on an ad and making a direct purchase.

They often include multiple searches and website visits or can lead to an email, phone call, or store visit.

Using an analytics service like Google Analytics can help decide how credit for conversions is attributed to conversion paths.

Featured Image Credit: Paulo Bobita

Brandon D. James