Pay-per-click (PPC) is an advertising model unique to the internet, that's been around since about 2002.

A pay-per-click ad is a small, four line ad consisting of a headline, two short lines of text and URL. It doesn't contain graphics, color variations, music or video, and you can't pay extra to get more space. Although they sound and look rather basic, pay-per-click ads are one of the most powerful ways of advertising today because they are so targeted.

Rather than just displaying to whoever happens to be in the vicinity, as with TV or billboard advertising, pay-per-click ads only display to people who have shown an active interest in the topic by either searching for information, or by going one step further and visiting a website; what this means for you, as an affiliate, is that the conversion rate of pay-per-click ads is much higher than other advertising models.

Another enormous benefit is that you only pay for the times when the ad gets clicked on. While that doesn't necessarily mean that you'll get a sale, it's a lot better than paying merely for the privilege of having your ads on show (pay-per-impression), which is what used to be the case before pay-per-click was introduced.

Search versus Content ads

There are two different types of pay-per-click ads.

The ads that appear beside the organic search results in Yahoo, Google and Bing search engines are called 'search' ads because they are triggered by the words people search for - for example, someone's search for 'cat training' will display pay-per-click ads targeting related keywords phrases.

The second type of pay-per-click ads are 'content' ads. These ads appear within a website or blog. Unlike search ads, content pay-per-click ads are based on the keywords within the website itself, rather than any user action. The trick with content ads is making sure your website or blog is well optimized for your topic, so that the most relevant ads possible are displayed. If you have a website about flamenco dancing for example and your site isn't properly optimized, then you could get ads displaying for the DVD version of 'So You Think You Can Dance' for sale on eBay or, worse, something that probably has very little significance for your market, such as 'Dance Studios for Under 5s'.

Types of Content Ads

Content ads can be in two formats: text - the traditional type of Google ad most people will automatically think of — and image ads - i.e. animated banners in either gif or Flash format. Both text and image ads can be used for placement-targeted and keyword-targeted campaigns.

If you thought that banner-style advertising was dead, think again. Our experiments have led us to conclude that image content ads are consistently more profitable than text content ads. And we're not the only ones. Mark Lindsay goes so far as to claim that he gets triple the click through rates on image ads as he does from straight text ads!

(Be sure to read our blog post on How to Write Good Banner Ads)

The Cost of Pay-per-click Advertising

Pay-per-click ads are rewarded for high quality and penalized for inferior quality. This is simply because the whole system would fall apart if visitors started to see pay-per-click as bad value; but if ads are high quality, then everyone will benefit.

For that reason, the better your ad, then the less you have to pay per click, and the more exposure you get. A win-win situation!

Although pay-per-click can be expensive, you can set limits on your spending to ensure you don't end up bankrupt overnight. When you set up your ads you will be choosing your maximum cost per click, which can be as low as 10 cents, or as high as $50. The minimum amount you will have to pay will vary depending on the search engine and the popularity of the keyword you wish your ad to appear for.

You also get to set a daily budget, which could be anything between $5 and $5000. This will determine how many times per day your ad gets shown. If you have a budget of $20 per day, and are paying a maximum cost per click of 30 cents, then you ad can be shown up to about 66 times a day. But if you are paying $1 per click, then your ad will only be shown 20 times. Don't worry if this sounds a bit confusing, we'll be going into a lot more detail in later lessons. For now, we just want to point out that although pay-per-click can be expensive, you do have some control over what you spend.

Keywords

Keywords are a huge part of pay-per-click success as they determine how targeted your audience is, which in turn, determines your conversion rate.

When you set up your ads, you will be able to bid on the keywords and keyword phrases that you think your target market is most likely to search for. For example, someone promoting a learn yoga course would probably bid on the keywords 'learn yoga' and 'yoga for beginners' as they seem like search terms that their target audience would use.

Finding the best keywords for highest conversions is an art and top pay-per-click advertisers spend hours analyzing the most profitable keywords for their campaigns.

Sometimes a relatively small difference can make a big difference to the number of conversions you get. For example, 'cat fur allergy' might get more clicks than 'cat hair allergy'!

Luckily, there are also plenty of keyword tools out there to help you discover what words your target market use to find information related to what you are promoting; we'll be taking a look at them in a few lesson's time.

Lesson Summary

In this section of Affilorama, you'll learn our essentials for making pay-per-click work, including:

• Keywords – how to find profitable keywords and how to categorize them
• How to write an exciting and compelling ad
• Ad placement — How to get your ad ranking in the top four positions for maximum exposure
• How to design your landing page (the page your ad links to) to win maximum brownie points with the search engines
• How to track your conversions so you can learn what ads are doing well and what ones aren't