Definition: Pay-per-Click (PPC) is a digital advertising model where a business pays an ad publisher for every user click on their advertisements. While "PPC" if often used exclusively to describe search engine advertising platforms such as Google AdWords, the business model is used by a variety of advertisers. An important metric to monitor in conjunction with PPC campaigns is Cost-Per-Click (CPC).
The PPC cost structure is calculated by taking the ecommerce business' marketing cost and dividing it by the total number of clicks that an ad generates. In contrast to antiquated advertising methods such as CPM (cost per thousand impressions), PPC only costs advertisers when users convey enough intent to click in the first place.
Ads are shown in search engines based on a bidding auction, quality score, and other ranking factors that make up their proprietary algorithms. The search giant's objective is to return the most relevant results that provide the best possible user experience. By conducting keyword research, online merchants can identify relevant queries and craft campaigns and landing pages to provide a relevant result.
Unlike commission-based pricing models, PPC marketing can be abused with click fraud. This occurs when motivated individuals (such as competing businesses) or bots abusively click ads solely to drive up costs. Google and other search engines combat click fraud with algorithms that identify abusive behavior, but it can still affect ecommerce PPC campaigns.