The Evolution of PPC

Evolution of PPCIn 2013, more than half the staff in the average office will have heard of PPC, or pay-per-click, even if they don’t quite know what it is – but not long ago, only those who worked in digital marketing knew anything about it. Following the exponential growth of the digital marketing industry over the last decade, pay-per-click advertising is no longer a niche marketing medium. As we have moved towards a digital economy, few stragglers remain. Nearly all large, medium-sized and indeed many small companies, either having led the way or dragged kicking and screaming, have moved with the times.

Today you’ll rarely find an organization of medium or above size with a stake in the digital economy without the core components of a digital marketing function – typically a social media manager, a web analyst, an SEO (Search Engine Optimization) manager and a PPC, or paid search manager. If the company also does email marketing, you can add another head to that. The functions are occasionally combined – in really small companies, it may all fall to one person – but as anybody who has managed PPC campaigns on a large scale knows, it’s a full-time job.

Google AdWords is still by far the largest pay-per-click network, although Yahoo and Microsoft combined forces in 2010 to launch their own PPC platform, AdCenter, via Microsoft’s Bing search engine.

The Birth of Pay Per Click Advertising

It may come as a surprise to some to learn that the pay-per-click system was first rolled out commercially not by Google, but a company named Planet Oasis, who charged per click for users’ listings in its desktop-based web directory in 1996. However, the paid search advertising model became widely known after Google introduced it 1999 via a system of online ad placement, branded the following year as Google AdWords. AdWords allowed content advertisers to place text-based, clickable ads on the Google search engine. For the first two years following its introduction, AdWords worked on a cost per impression (CPI) basis only. Advertisers would pay for the ad to appear on search engine results pages, or SERPS.

As with the long-standing tradition of payment for ad space in television and print media, the value of the ad placed with the CPI model was based on exposure. The assumption was that if the ad was displayed 1000 times, 1000 people had been exposed to it, just as an ad in a magazine with readership of 10,000 had, in theory, been exposed to those 10,000 people. The flaws in this system, however, were apparent. As with the offline model, impressions were no guarantee of exposure, and certainly not of conversion.

Pay-per-click worked on a new premise – one that would serve advertisers better, providing more efficiency and value than television or print-based advertising could. Rather than paying for an ad to be displayed, advertisers could opt to pay only when the ad was clicked, guaranteeing that users were being exposed to the advertisers’ online content.

The other side of the coin came with Google AdSense, launched in 2003. AdSense allowed content owners to be paid on a per-click basis to host ads administered by Google on their websites. The ads would be targeted and relevant to the content they appeared alongside, allowing any subscribed AdSense user to monetize their online content. The websites of AdSense-registered content owners became part of the Google content network.

AdWords PPC ads served via the content network tend to work via a fixed price per click.

AdWords ads served on search engines, however, usually work via a bidding system whereby advertisers compete against each other for keywords or keyword combinations, via which their ads are served up on SERPs. A maximum bid – a limit above which the advertiser will pay no more – can be pre-set, with the highest bidder generally winning, although this is beginning to change, with other factors also taken into account.

More recently, companies with a focus on online marketing have opted to use automated bid management tools – intelligent systems which collate information input by the user such as KPIs (key performance indicators), profit margins, conversion rates – and manage the keyword bids according to how the advertiser’s website has performed against these predefined targets.

Changes in the World of PPC

Much change in the world of PPC over the years has been ‘under the hood’. Google’s mystery-shrouded PageRank algorithm has evolution of PPC - cycleevolved and become increasingly complex. From penalizing websites for the now long-gone practices of link farming and ‘keyword stuffing’ (filling websites with dictionary-like lists of hidden, irrelevant keywords in order to ‘cheat’ search engines into picking them up via as many keyword searches as possible) to ensuring the most authoritative, well put-together and relevant content is duly rewarded in today’s search results, PageRank has become more and more ‘intelligent’ with time.

In the same way the AdWords algorithm, AdRank, has been updated to make it more efficient – although exactly how, as with PageRank, has never been fully revealed by Google. Besides preventing ‘cheating’ to gain a high CTR by preventing automated and repeat clicking on ads, AdRank aims above all to reward relevance of ad text to the related content, quality of the landing page and high CTR, or click-through rate (calculated by dividing clicks by impressions) all of which go towards an overall Quality Score.

As paid search advertising has grown in sophistication, complexity and reach, PPC managers are busier than ever. As increasing numbers of content providers subscribe to Google’s content network, Google’s empire grows with the numerous platforms it has either developed or acquired – Blogger, Youtube, Gmail, Picasa. Ads can be served across a wide range of online media – alongside news content, video content, geographical (map) searches and social networks.

Bid management tools improve the efficiency of ad campaigns, but the bid management platforms themselves need managing. With opportunities for increased flexibility and granularity in placing ads – for example, allowing separate bids on keywords dependent on whether the ads are served on SERPs or the content network – setting different bids for different times of the day – the systems need calibrating, monitoring and optimizing to get the best from PPC performance.

It’s a trend that can only continue. With clear indicators that investment in, and efficient calibration of PPC campaigns significantly increases ROI, few companies can afford to ignore the power of paid search. Bid management tools will become more intelligent, as will the algorithms governing search rankings and ad placement. As we move closer and closer towards ‘big analytics’ and data warehousing, today’s PPC managers and executives are well-positioned to be the stars of the future.

Article supplied by Caroco Marketing – a UK based Online Marketing Agency. You can read more posts by the Caroco Marketing PPC Hero here at http://www.caroco.co.uk.

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Article originally written for the click-finders.com blog by David Garfield of Caroco Marketing.


 

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9 Comments

  1. Phillip Newsome

    Nice overview and history of PPC. Thanks for sharing.

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