How it works: Pay Per Click (PPC)

At Squirrels&Bears we believe in simplicity and we like to provide clear answers to your questions. In our #howitworks series we focus on simple explanations of various aspects of small business, highlighting the basic facts, what works and what doesn’t work. And we hope to make your life a little easier.

The Basics

  • Pay per click (PPC) is a paid advertising tactic where the advertiser pays a publisher for every click on an ad.
  • PPC is also called cost per click (CPC).
  • PPC includes a variety of text, rich-media or social media ads – some displayed on search networks, such as the Google and display network, such as YouTube or Gmail.
  • With search networks, advertisers typically bid on keyword phrases relevant to their target market. In contrast, content sites usually charge a fixed price per click rather than use a bidding system.
  • “Banner” ads, also known as PPC “display” advertisements are shown on web sites with related content that have agreed to show ads and are typically not pay-per-click advertising.
  • PPC has an advantage over cost per impression in that it conveys information about the ad’s effectiveness.
  • Cost per click is calculated by dividing the cost of a paid advertising campaign by the number of clicks using the following formula: Cost per click = Advertising cost / number of clicks.


  • Set clear goals and measurable objectives.
  • Define your budget and start small.
  • Focus on displaying your ads where your target audience is likely to frequently visit.
  • Compare your cost per click to revenue generated.
  • Focus on metrics that are impacting your bottom line.
  • Perform a detailed keyword research before setting up your ads.
  • Experiment with different long-tail keywords.
  • Design your ads to attract the right audience.
  • Set up A/B testing.


  • Underestimate the power of negative keywords.
  • Use broad match on all your keywords.
  • Direct all ads to your homepage.

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