Pay-per-click advertising is one of the most cost-effective methods of getting leads known to Internet business owners. It gives you instant traffic, and allows you to test your business model in real time. At the same time, pay-per-click advertising (or PPC) is not as simple to use as the PPC companies will have you believe. If you jump into the system without preparing for ‘tracking’ your results, doing deep keyword research, establishing your ROI and most importantly, testing your ads, you’ll lose a lot of money really fast. Before we start talking about the major PPC engines, here’s a brief overview of what you need to know.

The Basics Of Pay Per Click There are some terms that you should know if you want to understand any discussion on PPC. Some of these are self-explanatory, some you might have heard before. Either way, go through this section and make sure to read those parts that you don’t know of.

The PPC Model In the PPC advertising model, you have three core elements – keywords , ads , and bids . These three elements are combined with ‘ placement ‘ to create an advertising model that displays ‘relevant’ ads on search engines (in response to keyword searches), portals and websites that opt to display such ads on their pages (the ads to be shown are determined by a keyword analysis of the page). For a PPC campaign, you need to know the keywords that you are targeting. For example, for a niche site that promotes a time management product, I would create a list of keywords that included keyword groups containing terms related to time management, productivity, saving time, self improvement and maybe even business soft skills. As I’ve told you before about keyword research, you should have a big list so that you capture most, if not all, of your target traffic.

The next step is to write the ad copy for the ads that will be displayed for your searches. The ad copy is extremely important because along with your bid amount, this will determine the ‘conversion rate’ (explained below) of your ads. Write concise, compelling ad copy that highlights the benefits of your website / product, and avoid fluff. Once you’ve written your ads, it’s time to bid . The bidding mechanism differs from PPC engine to engine, but the idea is the same – your bid amount is the maximum cost (usually calculated in U.S. dollars) that you are willing to pay for each keyword. It’s important to know how much you can afford in terms of bidding costs so that you avoid going into bidding wars with your competitors, and also so that you don’t spend more than you make through this campaign.

- Cost-Per-Click: Cost-Per-Click ( CPC ) is the amount you pay each time a potential customer ‘clicks’ on one of your ads that they see on their search engine results or on websites. This is often less than the maximum bid amount you set for each keyword.

- Conversion Rate: Conversion Rate is the ratio of clicks over impressions (the number of times your ad is displayed on searches or page loads on websites). A typical conversion rate is between 2 to 3 percent – that is, for every 100 impressions, you get 2-3 clicks on your ads. Conversion Rate is closely tied in with the quality of your ad copy , and also with Placement , which I’ll discuss next.

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