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How Does PPC Bidding Work?

PPC advertising is popular because it allows marketers to target a specific audience and track the effectiveness of their advertising campaigns.

Edona Shala

Content Writer

How Does PPC Bidding Work?

If you’ve checked into online marketing options for your company, you’ve most likely heard of PPC, or pay-per-click, advertising. PPC advertising is popular because it allows marketers to target a specific audience and track the effectiveness of their advertising campaigns.


PPC advertising allows advertisers to bid on specific keywords or phrases for which they want their ads to appear in search engine results. But how does Google decide which ads to show when you enter a long-tail or short-tail key phrase? And how exactly does PPC bidding work? 


In this guide, we’ll go over everything you need to know about PPC bidding.

Pay-Per-Click: A Basic Overview

PPC is a type of online marketing in which advertisers pay every time a user clicks on one of their ads. One of the most common forms of PPC advertising goes through search engines like Google Ads. PPC advertising can also go through social media platforms such as Facebook and Instagram and through display advertising on websites. 


Marketers bid on keywords, and their ads show up at the top of SERPs when those keywords are searched for. Your ads’ placement goes up the higher your bid and the more relevant they are.


The cost of the ad will vary depending on the bid amount, keywords you select, the level of competition, and the quality of your ad.


To ensure the success of your PPC campaigns, you’ll need to track specific key performance indicators (KPIs). These KPIs will allow you to calculate your return on investment (ROI) and make changes to your campaigns as needed.

PPC Bidding: How Does It Work?

When running a PPC campaign, you will begin by selecting keywords that you want to target. Then, using these keywords, you’ll create an ad and submit it to the search engine. When approved, your ad will appear next to organic listings in search engine results.


Your ad could appear at the top of the SERPs when someone searches for a keyword related to your business. If someone clicks on your ad, you’ll be charged a cost-per-click fee. 


The search engines do not display ads on each query, but when the engines find that a query has commercial intent, a bid is placed as soon as the user sends the search query.


A marketer’s eligibility for the bid is determined by how much an advertiser is willing to pay for a click. Marketers specify the highest bid they are willing to pay. Bids can be set for individual keywords or for groups of related keywords.


The goal of search engines is to show ads that users will want to click on. Users have a negative experience when ads are irrelevant, and engines lose revenue from ad clicks. This is where the second aspect of ad relevance comes into play.


When an ad is eligible for bidding, the engines use the following formula: Max CPC x Quality Score = Ad Rank. This determines where an ad appears on the page.

Ad Format Options Across Platforms

There are several different ad formats to choose from, depending on which platforms you want to use.


Google offers several types of ads for various purposes.


  • Text-based search ads appear at the top of search result pages. 
  • Display ads are image-based and can be found on websites that are part of the Google Display Network. 
  • Video ads are video-based ads that can be seen on YouTube, the Google Display Network, or even the search results page. 


Shopping ads aim to show potential buyers product images, prices, and descriptions on Google Shopping or other online stores. Amazon provides two types of ads for marketers to promote their products. 


  • Sponsored product ads appear alongside organic search results and include product images, prices, and descriptions. 
  • Sponsored brand ads, on the other hand, appear at the top of the search results page and include a logo, images, and text.

Some of the most common types of ads on Facebook’s platform are video ads that appear in a user’s newsfeed.

  • Carousel ads are another type that display multiple images, videos, or products that the user can scroll through.
  • There are also lead ads that encourage users to sign up for a service by submitting their contact information directly on the website.


LinkedIn’s platform includes several types of advertisements:


  • Sponsored content ads, which appear in a user’s news feed, are one type.
  • Text ads, which appear on the right side of the screen, are another type.
  • Then there are dynamic ads, which are customized based on the user’s interests, job, and other relevant factors.

The Cost of Pay-Per-Click

While PPC costs on average between $1 and $7, the reality is more complicated. 


A bidding system determines the cost of PPC ads, in which you compete with other advertisers for the same keyword, and the highest bidder wins. And if your industry has a high average order value, marketers will be willing to pay more per click because they know they’ll get a good return on their investment.


The Keyword Planner tool in Google Ads is the most precise way to determine how much you should be paying. It’s completely free, and it estimates how much you should pay for each keyword.

Google Ads’ Auction

Google Ads uses a one-of-a-kind auction system. This system determines which ads Google will serve before each search query and how much each advertiser will pay for that query.


The auction works by ranking every ad based on its Ad Rank. AdRank is determined by an algorithm that takes into account several factors, including the bid and quality score of an ad. After that, advertisers receive a cost per click (CPC) based on AdRank. The higher the Ad Rank, the more each click costs.


Advertisers can also set bid limits on their campaigns, which helps them manage their budgets. Advertisers can set a maximum bid they are willing to pay with bid limits, and Google will not charge them more than their limit.

PPC Bidding Strategies

You’ll need to select a bidding strategy when managing PPC campaigns. Bidding strategies inform search engines about how much you are willing to pay per click.


Manual bidding is one of the most popular strategies.


You set your bids for each keyword when using manual bidding. This allows you to adjust your bids based on how much you’re willing to pay per click, allowing you to stay within your budget.


You can set a higher bid for your keywords using manual bidding, ensuring your ad appears at the top of the page—and possibly paying more per click than you’d pay for less competitive keywords.


Enhanced CPC is another popular bidding strategy. This method allows Google to automatically adjust your bids based on device, location, and keyword relevance. Google’s algorithms will adjust your bids as needed in order to get more clicks and conversions at a lower cost.


Automated bidding strategies such as “Target CPA” or “Maximize Conversions” are available. If you don’t have the time or resources to manage your bids manually, automated bidding strategies can help.


These strategies allow you to set a target (such as cost per acquisition, or CPA) and then let Google’s algorithms adjust your bids to meet that target. If you want to reduce your CPA, Google will adjust your bids to get you the most conversions at the lowest cost.

How to Avoid PPC Ad Waste

As you get familiar with PPC bidding, you’ll start to understand how high of a bid you’ll need to get the visibility you want. A PPC audit helps you understand how your campaign is performing over time and how you can improve it.


You should review your PPC campaign analytics regularly—once a day. If you discover that you’re paying for a lot of “junk” clicks, it’s a clear indication that you should pause your campaigns and investigate.


A potential cause of this is using too broad keyword targets. This may get people who aren’t interested in your products to click, and while this will increase your traffic, it’s not a wise investment of your money.


Use PPC advertising in conjunction with big events. These are fantastic opportunities for you to get in front of potential buyers right away. Make changes to your bids, especially if conversions are high. Take charge as soon as you notice an increase in conversions. When and if conversion rates begin to fall, you can always lower your bid.

Final Thoughts

PPC is a powerful tool for getting your company noticed on today’s crowded Internet. And once you start bidding appropriately and consistently, you’ll realize it’s a lot less confusing than you might have thought. 


Before investing, it is important to understand the basics of PPC bidding as well as the nuances of various platforms. It’s also important to monitor costs and ad performance to ensure that your money is making an impact on your end. When done correctly, you can use PPC bidding as part of an effective digital marketing campaign to drive real results. 

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