It wasn’t so long ago that you could get top rankings for free. At some point, though, search engines figured out they could make money by guaranteeing that your listing appeared at or near the top of a certain keyword search return.

Google was the pioneer of this concept with their AdWords program. They have since added their AdSense program, which offers site owners the option of adding Google advertiser listings to their site. Each time a visitor clicks on a link, you earn revenue from Google.

Simply put, “pay per click” is an advertising strategy where a search engine provides you with preferred placement on a page based on a chosen keyword, or keywords. Site owners bid against one another to gain the top positions. When a search engine visitor enters a keyword, paid listings either appear as the top rankings in the returned results or appear on the right side of the results in a separate column. Each time a search engine visitor clicks on the link in your AdWords listing, you are charged the “going rate” for that click. The “going rate” is the amount you bid to have your AdWords listing placed on that page.

Let’s look at an example…

Say you sell collector plates from the Franklin Mint. You purchase the keywords “Franklin Collector Plates” for $1 per click. Your listing appears on google.com as the fourth listing on the right side of the page. The AdWords listings are the ones labeled “Sponsored Links”. Being number four means three other companies paid more for those keywords than you did. When someone searching for “Franklin Collector Plates” clicks on your link, you are charged $1. If the person above you bid $1.50 for the same words, that is what they are charged.

In a pay per click program, you determine what rate you are willing to pay for what keywords. You then create your “ad” for that listing. You can then access the traffic to your site, add funds to your advertising budget, increase or decrease the bid for those keywords or change the keywords that allow you to get a higher ranking with a different search phrase.

Pay per click can obviously get quite expensive if you’re using a common search word like “Harley Davidson”. These keywords command top dollar and you can quickly find yourself at $15 a click or more for the top search words on a site like Google.

However, if you know your customers well, you can use keywords that are in less demand and yet still create the kind of traffic you want from your target audience.

Not only can you control the search words, but you can also dictate how broad or narrow your pay per click campaign is. You can target specific cities or regions, define a certain radius from your place of business or even create a listing that has specific streets as borders. This can reduce your pay per click cost in many cases. Using the example above, say you change your expensive “Harley Davidson” listing to “Harley Davidson, Colorado Springs”. Your listing won’t necessarily show up in the first 20 pages of “Harley Davidson” listings but it may be #1 or #2 for Harley Davidson products in Colorado Springs. This simple change may cut your per click fee from $15 to $ .15.

Like most advertising strategies, you’ll need to experiment with pay per click programs. Google’s AdSense is a great place to start as its sophisticated controls and great reporting functions allow you to modify your campaign instantly.

Is there a downside to pay per click? Sure there is! Every time someone clicks on your link – whether it’s just an innocent mistake or an unsupervised five year old that just found out how to click mom’s mouse – money is deducted from your advertising budget.

The good news is that most pay per click sites have some very good tutorials and lessons available so you don’t have to use up your advertising monies through trial and error. Obviously, these strategies are very effective as every major retailer is using pay per click on a large scale to draw business to their websites and to their brick and mortar stores.

PPC Resources:

1.  Adwords vs. Overture – Overture is Yahoo!’s answer to Google’s Adwords.

2.  Ad Writing – One of the greatest things about PPC is that you can tweak your ad campaign to your heart’s content.

3.  More Ad Writing – Here’s an example of a poorly written ad from a very well known company.