Pay-per-click

Pay-per-click (PPC), also known as cost per click (CPC), is an internet advertising model used to drive traffic to websites, in which an advertiser pays a publisher (typically a search engine, website owner, or a network of websites) when the ad is clicked.

Pay-per-click is commonly associated with first-tier search engines (such as Google Ads and Bing Ads). With search engines, advertisers typically bid on keyword phrases relevant to their target market. In contrast, content sites commonly charge a fixed price per click rather than use a bidding system. PPC "display" advertisements, also known as "banner" ads, are shown on web sites with related content that have agreed to show ads and are typically not pay-per-click advertising. Social networks such as Facebook and Twitter have also adopted pay-per-click as one of their advertising models.

However, websites can offer PPC ads. Websites that utilize PPC ads will display an advertisement when a keyword query matches an advertiser's keyword list that has been added in different ad groups, or when a content site displays relevant content. Such advertisements are called sponsored links or sponsored ads, and appear adjacent to, above, or beneath organic results on search engine results pages, or anywhere a web developer chooses on a content site.[1]

The PPC advertising model is open to abuse through click fraud,[2] although Google and others have implemented automated systems[3] to guard against abusive clicks by competitors or corrupt web developers.[4]

Purpose

Pay-per-click, along with cost per impression and cost per order, are used to assess the cost effectiveness and profitability of internet marketing. Pay-per-click (PPC) has an advantage over cost per impression in that it conveys information about how effective the advertising was. Clicks are a way to measure attention and interest: if the main purpose of an ad is to generate a click, or more specifically drive traffic to a destination, then pay-per-click is the preferred metric. Once a certain number of web impressions are achieved, the quality and placement of the advertisement will affect click through rates and the resulting pay-per-click.

Construction

Cost-per-click (CPC) is calculated by dividing the advertising cost by the number of clicks generated by an advertisement. The basic formula is:

Cost-per-click ($) = Advertising cost ($) / Ads clicked (#)

There are two primary models for determining pay-per-click: flat-rate and bid-based. In both cases, the advertiser must consider the potential value of a click from a given source. This value is based on the type of individual the advertiser is expecting to receive as a visitor to his or her website, and what the advertiser can gain from that visit, usually revenue, both in the short term as well as in the long term. As with other forms of advertising targeting is key, and factors that often play into PPC campaigns include the target's interest (often defined by a search term they have entered into a search engine, or the content of a page that they are browsing), intent (e.g., to purchase or not), location (for geo targeting), and the day and time that they are browsing.

Flat-rate PPC

In the flat-rate model, the advertiser and publisher agree upon a fixed amount that will be paid for each click. In many cases the publisher has a rate card that lists the pay-per-click (PPC) within different areas of their website or network. These various amounts are often related to the content on pages, with content that generally attracts more valuable visitors having a higher PPC than content that attracts less valuable visitors. However, in many cases advertisers can negotiate lower rates, especially when committing to a long-term or high-value contract.

The flat-rate model is particularly common to comparison shopping engines, which typically publish rate cards.[5] However, these rates are sometimes minimal, and advertisers can pay more for greater visibility. These sites are usually neatly compartmentalized into product or service categories, allowing a high degree of targeting by advertisers. In many cases, the entire core content of these sites is paid ads.

Bid-based PPC

The advertiser signs a contract that allows them to compete against other advertisers in a private auction hosted by a publisher or, more commonly, an advertising network. Each advertiser informs the host of the maximum amount that he or she is willing to pay for a given ad spot (often based on a keyword), usually using online tools to do so. The auction plays out in an automated fashion every time a visitor triggers the ad spot.

When the ad spot is part of a search engine results page (SERP), the automated auction takes place whenever a search for the keyword that is being bid upon occurs. All bids for the keyword that target the searcher's Geo-location, the day and time of the search, etc. are then compared and the winner determined. In situations where there are multiple ad spots, a common occurrence on SERPs, there can be multiple winners whose positions on the page are influenced by the amount each has bid. The bid and Quality Score are used to give each advertiser's advert an ad rank. The ad with the highest ad rank shows up first. The predominant three match types for both Google and Bing are Broad, Exact and Phrase Match. Google also offers the Broad Match Modifier type which differs from broad match in that the keyword must contain the actual keyword terms in any order and doesn't include relevant variations of the terms.[6]

In addition to ad spots on SERPs, the major advertising networks allow for contextual ads to be placed on the properties of 3rd-parties with whom they have partnered. These publishers sign up to host ads on behalf of the network. In return, they receive a portion of the ad revenue that the network generates, which can be anywhere from 50% to over 80% of the gross revenue paid by advertisers. These properties are often referred to as a content network and the ads on them as contextual ads because the ad spots are associated with keywords based on the context of the page on which they are found. In general, ads on content networks have a much lower click-through rate (CTR) and conversion rate (CR) than ads found on SERPs and consequently are less highly valued. Content network properties can include websites, newsletters, and e-mails.[7]

Advertisers pay for each single click they receive, with the actual amount paid based on the amount of bid. It is common practice amongst auction hosts to charge a winning bidder just slightly more (e.g. one penny) than the next highest bidder or the actual amount bid, whichever is lower.[8] This avoids situations where bidders are constantly adjusting their bids by very small amounts to see if they can still win the auction while paying just a little bit less per click.

To maximize success and achieve scale, automated bid management systems can be deployed. These systems can be used directly by the advertiser, though they are more commonly used by advertising agencies that offer PPC bid management as a service. These tools generally allow for bid management at scale, with thousands or even millions of PPC bids controlled by a highly automated system. The system generally sets each bid based on the goal that has been set for it, such as maximize profit, maximize traffic, get the very targeted customer at break even, and so forth. The system is usually tied into the advertiser's website and fed the results of each click, which then allows it to set bids. The effectiveness of these systems is directly related to the quality and quantity of the performance data that they have to work with — low-traffic ads can lead to a scarcity of data problem that renders many bid management tools useless at worst, or inefficient at best.

As a rule, the contextual advertising system (Google AdWords, Yandex.Direct, etc.) uses an auction approach as the advertising payment system. CPC.

History

There are several sites that claim to be the first PPC model on the web,[9] with many appearing in the mid-1990s. For example, in 1996, the first known and documented version of a PPC was included in a web directory called Planet Oasis. This was a desktop application featuring links to informational and commercial websites, and it was developed by Ark Interface II, a division of Packard Bell NEC Computers. The initial reactions from commercial companies to Ark Interface II's "pay-per-visit" model were skeptical, however.[10] By the end of 1997, over 400 major brands were paying between $.005 to $.25 per click plus a placement fee.

In February 1998 Jeffrey Brewer of Goto.com, a 25-employee startup company (later Overture, now part of Yahoo!), presented a pay per click search engine proof-of-concept to the TED conference in California.[11] This presentation and the events that followed created the PPC advertising system. Credit for the concept of the PPC model is generally given to Idealab and Goto.com founder Bill Gross.[12]

Google started search engine advertising in December 1999. It was not until October 2000 that the AdWords system was introduced, allowing advertisers to create text ads for placement on the Google search engine. However, PPC was only introduced in 2002; until then, advertisements were charged at cost-per-thousand impressions or Cost per mille (CPM). Overture has filed a patent infringement lawsuit against Google, saying the rival search service overstepped its bounds with its ad-placement tools.[13]

Although GoTo.com started PPC in 1998, Yahoo! did not start syndicating GoTo.com (later Overture) advertisers until November 2001.[14] Prior to this, Yahoo's primary source of SERPs advertising included contextual IAB advertising units (mainly 468x60 display ads). When the syndication contract with Yahoo! was up for renewal in July 2003, Yahoo! announced intent to acquire Overture for $1.63 billion.[15] Today, companies such as adMarketplace, ValueClick and adknowledge offer PPC services, as an alternative to AdWords and AdCenter.

Among PPC providers, Google AdWords, Microsoft adCenter and Yahoo! Search Marketing had been the three largest network operators, all three operating under a bid-based model.[1] For example, in the year 2014, PPC(Adwords) or online advertising attributed approximately $45 billion USD of the total $66 billion USD of Google's annual revenue[16] In 2010, Yahoo and Microsoft launched their combined effort against Google, and Microsoft's Bing began to be the search engine that Yahoo used to provide its search results.[17] Since they joined forces, their PPC platform was renamed AdCenter. Their combined network of third party sites that allow AdCenter ads to populate banner and text ads on their site is called BingAds.[18]

Legal

In 2012, Google was initially ruled to have engaged in misleading and deceptive conduct by the Australian Competition & Consumer Commission (ACCC) in possibly the first legal case of its kind. The ACCC ruled that Google was responsible for the content of its sponsored AdWords ads that had shown links to a car sales website Carsales.com. The Ads had been shown by Google in response to a search for Honda Australia. The ACCC said the ads were deceptive, as they suggested Carsales.com was connected to the Honda company. The ruling was later overturned when Google appealed to the Australian High Court. Google was found not liable for the misleading advertisements run through AdWords despite the fact that the ads were served up by Google and created using the company’s tools.[19]

See also

References

  1. ^ a b "Customers Now", David Szetela, 2009.
  2. ^ Jansen, B. J. (2007) Click fraud. IEEE Computer. 40(7), 85-86.
  3. ^ Shuman Ghosemajumder (March 18, 2008). "Using data to help prevent fraud". Google Blog. Retrieved May 18, 2010.
  4. ^ How Google prevents invalid activity Google AdSense Help Center, Accessed November 17, 2014
  5. ^ Card Shopping.com Merchant Enrollment Shopping.com, Accessed June 12, 2007
  6. ^ "Keyword Matching Options Article: Keyword Matching Options Bing Ads". Google Support. Retrieved 26 January 2013.
  7. ^ Yahoo! Search Marketing (May 18, 2010). "Sponsored Search". Website Traffic Yahoo! Search Marketing (formerly Overture). Retrieved May 18, 2010.
  8. ^ The cost of AdWords Google AdWords Help, Accessed May 18, 2012
  9. ^ Jansen, B. J. and Mullen, T. (2008) Sponsored search: An overview of the concept, history, and technology, International Journal of Electronic Business. 6(2), 114 – 131.
  10. ^ Planet Oasis gives web sites promotion clout, Advertising Age July 8, 1996, retrieved December 5, 2012
  11. ^ Overture and Google: Internet Pay Per Click (PPC) Advertising Auctions, London Business School, Accessed June 12, 2007
  12. ^ Jansen, B. J. (2011). Understanding Sponsored Search: Coverage of the Core Elements of Keyword Advertising. Cambridge University Press: Cambridge, UK.
  13. ^ Stefanie Olsen and Gwendolyn Mariano (April 5, 2002). "Overture sues Google over search patent". CNET. Retrieved Jan 28, 2011.
  14. ^ Yahoo! Inc. (2002). "Yahoo! and Overture Extend Pay-for-Performance Search Agreement". Yahoo! Press Release. Retrieved May 18, 2010.
  15. ^ Stefanie Olsen (July 14, 2003). "Yahoo to buy Overture for $1.63 billion". CNET. Retrieved May 18, 2010.
  16. ^ Rosenberg, Eric (5 February 2015). "How Google Makes Money".
  17. ^ Singel, Ryan (18 February 2010). "Yahoo and Microsoft Join Search Forces". Retrieved 26 September 2012.
  18. ^ "Link to Webpronews.com Article: Yahoo And Microsoft Introduce The Yahoo Bing Network, adCenter Becomes Bing Ads". WebProNews. Retrieved 26 September 2012.
  19. ^ "Google Inc vs ACCC". Retrieved 2015-07-02.
Affiliate marketing

Affiliate marketing is a type of performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought by the affiliate's own marketing efforts.

AppNexus

AppNexus is an American multinational technology company operating a cloud-based software platform that enables and optimizes programmatic online advertising. Headquartered in New York City, the company has 23 offices in North America, Latin America, Europe, Asia and Australia.

AppNexus offers online auction infrastructure and technology for data management, optimization, financial clearing and support for directly negotiated advertising campaigns. It has both demand-side platform (DSP) and supply-side platform (SSP) functionalities. It integrates with advertising sources including Google's DoubleClick, Microsoft's AdECN, engage:BDR and other aggregators. It operates out of multiple data centers, including one in Amsterdam serving Europe and the Middle East, in a facility shared with Equinix.In 2016, AppNexus was ranked #21 on the Forbes Cloud 100 list.In June 2018, AT&T announced it was acquiring the company and putting it under its Xandr division as a subsidiary. AppNexus was reportedly sold for $1.6 billion while most news outlets speculated the company not to sell for less than $2 billion.

Ask.com

Ask.com (originally known as Ask Jeeves) is a question answering–focused e-business founded in 1996 by Garrett Gruener and David Warthen in Berkeley, California.

The original software was implemented by Gary Chevsky from his own design. Warthen, Chevsky, Justin Grant, and others built the early AskJeeves.com website around that core engine. From the mid-2000s, The "Jeeves" name was dropped and focused on the search engine, with its own algorithm. In late 2010, facing insurmountable competition from more popular search engines like Google, the company outsourced its web search technology and returned to its roots as a question and answer site. Douglas Leeds was elevated from president to CEO in 2010.Ask.com has been criticized for its browser toolbar, which has been accused of behaving like malware due to its bundling with other software and the difficulty of its uninstallation.

Three venture capital firms, Highland Capital Partners, Institutional Venture Partners, and The RODA Group were early investors. Ask.com is currently owned by InterActiveCorp (IAC) under the NASDAQ symbol NASDAQ: IAC, and its corporate headquarters are located at 555 City Center, in the Oakland City Center development in downtown Oakland, California.

Cheapflights

Cheapflights is a travel fare aggregator and travel fare metasearch engine. The website is part of the Kayak.com subsidiary of Booking Holdings.

Its websites publish flight prices, and compare prices from suppliers, including major airlines, through tiny travel agents. The company uses pay-per-click and display advertising.

Agents advertise on the Cheapflights websites and are charged on a pay-per-click basis for users who link through to their websites.

Click fraud

Click fraud is a type of fraud that occurs on the Internet in pay-per-click (PPC) online advertising. In this type of advertising, the owners of websites that post the ads are paid an amount of money determined by how many visitors to the sites click on the ads. Fraud occurs when a person, automated script or computer program imitates a legitimate user of a web browser, clicking on such an ad without having an actual interest in the target of the ad's link. Click fraud is the subject of some controversy and increasing litigation due to the advertising networks being a key beneficiary of the fraud.

Media entrepreneur and journalist John Battelle describes click fraud as the intentionally malicious, "decidedly black hat" practice of publishers illegitimately gaming paid search advertising by employing robots or low-wage workers to repeatedly click on each AdSense ad on their sites, thereby generating money to be paid by the advertiser to the publisher and to Google.

Compensation methods

Compensation methods (Remuneration), Pricing models and business models used for the different types of internet marketing, including affiliate marketing, contextual advertising, search engine marketing (including vertical comparison shopping search engines and local search engines) and display advertising.

Cxense

Cxense (pronounced ['si:sɛns]) is a company that provides advertising, data-management, search, analytics and content-recommendations services. Cxense is headquartered in Oslo, Norway, with offices in New York, San Francisco, Buenos Aires, Berlin, London, Samara, and Tokyo.The firm has a relationship with the Wall Street Journal, expanded in 2016. Later in 2015, Cxense's Ståle Bjørnstad joined the WSJ CEO Council.

Dohop

Dohop is a travel search engine website based in Reykjavík, Iceland. It was founded in 2004 to aggregate and link low cost flight connections. In 2005, Dohop launched the world's first flight planner for low-cost airlines and later expanded it to include all scheduled flights worldwide, amounting to 660 airlines.

Dohop is primarily a long tail aggregation agent that doesn't sell directly to the consumer, but refers the user to airline's booking engines. Dohop's income comes from pay per click advertising and from selling specialized search engines to airlines and airports. The company also operates an analytics department offering route network analysis and optimization suggestions to airlines and airports.

In 2006 Travelmole the company won the Web Awards in the category for best technology site, and was selected as one of the Times Magazine 100 best travel sites in 2007.In 2014 Dohop won the World's Leading Flight Comparison Website award at the World Travel Awards and subsequently won the award three years in a row in 2016, 2017, and 2018.

Google Ads

Google Ads (previously Google AdWords, before July 24, 2018) is an online advertising platform developed by Google, where advertisers pay to display brief advertisements, service offerings, product listings, video content, and generate mobile application installs within the Google ad network to web users.Google Ads has evolved into Google's main source of revenue, contributing to Google's total advertising revenues of US$95.4 billion in 2017. Google Ads offers services under a pay-per-click (PPC) pricing model. Although an advanced bidding strategy can be used to automatically reach a predefined cost-per-acquisition (CPA), this should not be confused with a true CPA pricing model.Sales and support for Google's AdWords division in the United States is based in Mountain View, California, with major secondary offices in Hyderabad, Dublin, Singapore, Ann Arbor and New York City. The third-largest US facility is the Googleplex, Google's headquarters, which is located in Mountain View, California. Google AdWords engineering is based at the Googleplex, with major secondary offices in Los Angeles and New York.

As of June 2018, Google derives 86% of its total revenues through trading advertising inventory through AdWords, DoubleClick AdExchange, and DoubleClick Bid Manager, among others.

Mahalo.com

Mahalo.com was a web directory (or human search engine) and Internet-based knowledge exchange (question and answer site) launched in May 2007 by Jason Calacanis. It differentiated itself from algorithmic search engines like Google and Ask.com, as well as other directory sites like DMOZ and Yahoo! by tracking and building hand-crafted result sets for many of the currently popular search terms. President Jason Rapp exited the company in September, 2012.In 2014, Calacanis announced that Mahalo would be sunset as he moved his focus towards an app called Inside. He was quoted by TechCrunch saying "it makes 7 figures so we’re not shutting it off but we are not investing in it". Mahalo's website has since shut down.

Microsoft Advertising

Microsoft Advertising (formerly Bing Ads, Microsoft adCenter and MSN adCenter) is a service that provides pay per click advertising on both the Bing and Yahoo! search engines. As of June 2015, Bing Ads has 33% market share in the United States.

Niche blogging

Niche blogging is the act of creating a blog with the intent of using it to market to a particular niche market. Niche blogs (also commonly referred to as "niche websites") may appeal to "geographic areas, a specialty industry, ethnic or age groups, or any other particular group of people." While it could be argued that every blog is, in some form, a niche blog, the term as it applies to marketing refers to a particular kind of blog.

Neither blogging nor niche marketing is a new concept. However, only in recent years has the concept of a niche blog come into being.

Usually, niche blogs will contain affiliate links or advertisements of some sort (pay-per-click or products or both). In some cases, the purpose of the niche blog is to incite the reader into visiting another website which may then attempt to sell the reader a product or service.

Niche blogging and splogging are often hard to distinguish. However, niche blogging's reliance on pay-per-click advertising and other revenue streams usually requires such blogs to have valuable content related to their chosen niche, unlike a splog.

Organic search

Organic search is a method for entering one or several search terms as a single string of text into a search engine. Organic search results, appear as paginated lists, are based on relevance to the search terms; and exclude advertisements. Whereas, non-organic search results do not filter out pay per click advertising.

Pay for placement

Pay for placement, or P4P, is an Internet advertising model in which advertisements appear along with relevant search results from a Web search engine. Under this model, advertisers bid for the right to present an advertisement with specific search terms (i.e., keywords) in an open auction. When one of these keywords is entered into the search engine, the results of the auction on that keyword are presented, with higher-ranking bids appearing more prominently on the page.

When P4P was first introduced, controversy arose because seventy percent of Internet users were unaware that search results could be skewed as a result of such agreements, which in some cases led to legal action.Pay per click marketing is a subset of search engine marketing. It is not a form of SEO as SEO refers to practices which are intended to improve your organic search results.Pay per click marketing can be done through ad networks such as Google Adwords or by paying for placement on a specific site. The pricing structure of most pay per click marketing is built upon an auction model that takes keyword competition into consideration to determine the cost per click (cpc) or the cost per impression. (CPI).

Scour Inc.

Scour Inc. was a multimedia Internet search engine, and provided Scour Exchange, an early peer-to-peer file exchange service.

Scroogled

Scroogled was a Microsoft attack advertising campaign that ran between November 2012 and 2014. Created by Mark Penn, the campaign sought primarily to attack a competing company, Google, by pointing out disadvantages and criticism of their products and services in comparison to those run by Microsoft (particularly, Bing and Outlook.com). The original campaign focused on Google Shopping's change to a pay per click model, with later campaigns focusing upon Google's use of user data for targeted advertising, and the capabilities of the Chrome OS platform in comparison to Windows.

Search engine marketing

Search engine marketing (SEM) is a form of Internet marketing that involves the promotion of websites by increasing their visibility in search engine results pages (SERPs) primarily through paid advertising. SEM may incorporate search engine optimization (SEO), which adjusts or rewrites website content and site architecture to achieve a higher ranking in search engine results pages to enhance pay per click (PPC) listings.

Website monetization

Website monetization is the process of converting existing traffic being sent to a particular website into revenue. The most popular ways of monetizing a website are by implementing pay per click (PPC) and cost per impression (CPI/CPM) advertising. Various ad networks facilitate a webmaster in placing advertisements on pages of the website to benefit from the traffic the site is experiencing.

The two most important metrics that matter to a web publisher looking to monetize their site is "Fill Rate", or the % of inventory where ads can be shown by a partner advertising network, and eCPM, which is the effective cost per thousand impression dollar amount that is paid out to the publisher for showing ads to their audience.

Additionally, aside from typical ad display and various advertising generated revenue, some webmasters or site owners utilize Lead Generation to monetize Internet traffic to a website by creating leads or inquiries from submission forms or phone calls from interested consumers and then delivering those leads to a business seeking that type of inquiry.

Yahoo! Search Marketing

Yahoo Search Marketing is a keyword-based "Pay per click" or "Sponsored search" Internet advertising service provided by Yahoo.

Yahoo began offering this service after acquiring Overture Services, Inc. (formerly GoTo.com). GoTo.com was an Idealab spin off and was the first company to successfully provide a pay-for-placement search service following previous attempts that were not well received.

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