Pay-per-click (PPC) 101: Basic Terms and Strategy

#Search & Strategy Brian Murphy on August 16, 2017

Whether you’re starting a new business or you’ve owned the same company for years, you know how important it is to have an online presence. In today’s age of convenient and accessible technology, online research is a major part of the decision-making process. From laptops to tablets to smartphones, shoppers can search for the items they want right from the comfort of their homes.

But what if no one can find your website while searching?

Pay-per-click advertising, or PPC, enables you to get in front of your target customers at the times they are searching online for the products you sell or the services you offer. How? By using precise targeting with keywords, categorized demographics, and interests.

Pay-Per-Click (PPC): Basic Terms and Strategy.

The number of people using internet search increases every day. Here’s an overview of basic terms and strategy to help you learn more about pay-per-click (PPC) marketing and how it can help your business.

Impressions:

How many times your ad is served. For example, each time your ad appears on a search results page counts as 1 impression.

Clicks:

When someone clicks on your ad (there must be an impression for there to be a click).

Average Position:

An ad’s position is where it sits on the search results page compared to other ads. A position of 1 is the first ad on a page, a position of 2 is the second ad, etc. The average position is the average for any group of impressions.

Click Through Rate (CTR):

A percentage of total impressions that resulted in clicks. The higher the CTR, the more relevant an ad is to users’ search terms. Low CTR means the ad is unappealing or irrelevant to the search terms triggering the impression.

Ad Relevance:

An internal metric Google uses to measure how closely the text of the targeted keyword relates to the text of the ad served. An ad that has little or no text containing the keyword will have bad ad relevance.

Landing Page Experience:

An internal metric Google uses to measure how the written content of an ad’s landing page relates to the user’s Google search, and how “usable” Google thinks the page is. For example, if someone searches online using a smartphone, clicks on an ad, and is taken to a web page that isn’t optimized for mobile users, that is a bad landing page experience. Learn how to create landing pages that convert in a previous blog.

Ad Extensions:

Additional pieces of information that can be displayed with a basic ad. For example, an ad can also contain a phone number extension or link extensions to frequently visited pages on your website. For max ad performance, create different types of extensions and Google will test them by assembling your ad in different ways to see which extensions perform best. Ad extensions make your ads more appealing and help users find what they are looking for.

Quality Score:

An internal metric Google uses to measure how useful Google thinks your ad will be for a given keyword or search phrase. Three major factors contribute to a keyword’s quality score:

Increasing your quality score will make your ads perform better at a lower cost, which means you could spend less on clicks than your competition, but your ads will rank higher.

Max Cost Per Click (CPC):

This is your bid for a keyword, which means the most you are willing to pay for an ad click for this keyword. CPC can be modified through other bid adjustments.

Bid Adjustments:

Use bid adjustments to increase or decrease individual ad spend based on how valuable the user is to you. To modify your max CPC, you can make bid adjustments for:

  • The device being used for search (smartphone, tablet, laptop, etc.)
  • The location of the user searching (or the location they are showing interest in)
  • The time of day and day of week the user is searching

Adjusting bids for days and times:

For example, if you want to make sure your ad appears (impressions) on a certain day during a specific time frame, you can adjust your bid for users searching Mondays from noon to 6 p.m. by an additional 50% (raise your bid). If your base max CPC was $10.00, and you increase it by 50% for searches during this time, your new max CPC will be $15 ($10 + 50%).

Adjusting bids for mobile devices:

If more of your target customers use laptops for search on Mondays between noon and 6 p.m., you may choose to reduce your bid for mobile search, making your new max CPC for mobile users $13.50 ($10 + 50% – 10%).

Ad Rank:

An internal metric Google uses to determine your ad’s position. When a search results page is created, Google calculates the ad rank of all ads bidding on the user’s search term. The ad with the highest ad rank will be in the first position, the second highest ad rank will be in the second position, etc.

An ad rank is calculated by taking your max CPC (including bid adjustments) and multiplying by the keyword’s quality score. A further boost is given based on how well Google estimates any ad extensions will perform. Increasing your ad rank can help you get a higher position than your competitors.

Actual Cost Per Click (CPC):

The is the final amount you are charged for a click. It can’t be any higher than your max CPC (including bid adjustments), but it can sometimes be much lower. Actual CPC is calculated by your ad position (based on your ad rank) and the minimum amount you could have bid to maintain that rank. The result is the amount you are charged for each click.

Calculating actual CPC example:

Let’s say you and a competitor both bid $5.00 for the same keyword. Your quality score is 10 and his is 7 (let’s ignore the boost for ad extensions for this example). Your ad rank is $50.00 ($5.00 bid x quality score of 10) while his is $35.00 ($5.00 bid x quality score of 7). This means you only need to bid $3.51 for your ad to rank higher than his, and your actual CPC will be only $3.51. ($3.51 x 10 = a $35.10 ad rank, which is ten cents higher). Because of your higher quality score, you got a higher ad position than your competitor for a lower cost.

Average Cost Per Click (CPC):

The average amount a group of clicks cost; an average of actual CPC.

Average Cost Per 1,000 Impressions (CPM):

If getting your ad seen (creating awareness) is more important than getting ad clicks, then CPM is what you should focus on. In lieu of the name, this can still be calculated if there are fewer than 1,000 impressions. For example, if 100 impressions cost $0.90 then the CPM would be $9.00.

Pay-per-click (PPC) marketing isn’t something you can learn overnight and Google is constantly changing and improving its algorithms so you’ll need to know how to adjust on the fly. A professional agency with years of PPC experience knows how to write targeted ads, create relevant landing pages, monitor keyword bidding, and get the most clicks for your budget.

You know you sell amazing products or offer great services, but how will anyone else find out? PPC allows you to reach your target customer at the right time with the right ad. If you have questions or want to learn more about how a PPC ad campaign can get your business on page 1, contact BLUE Laser Design.