Pay per click has become the dominant model for online advertising, following the success of programs such as Google's AdWords and Overture (now part of Yahoo! Search Marketing).

Payment Methodologies

Broadly speaking, there are two kinds of payment options: flat fee and auction-based.

Flat Fee

Under a flat fee model, advertisers agree to pay a set sum to a website whenever their advert is clicked. This is especially common for banner advertisements. A site will agree to show a banner on behalf of an advertiser, and the advertiser will agree to pay an agreed amount every time that banner ad is clicked.

Auction Based

Under other models, advertisers can set an amount they are prepared to pay per click, but the amount they actually pay is determined through an auction system.

This is particularly common amongst ppc systems that run on search engines.

Under Google AdWords, for example, advertisers place bids to appear whenever a certain keyword is entered into Google. If person A is prepared to pay £1 for every click and is the highest bidder for that keyword his ad will appear at the top of the sponsored results.

The price he actually pays is determined by the next highest bidder. If person B has the second highest bid - say just 75p - then person A's ads will be displayed at the top of the listings, and he wil pay 76p for each click.

Tracking and Reporting

Because the PPC model relies on the ability to accurately record clicks, good PPC programs provide statistical packages that allow advertisers to see how many times their advert or banner was shown and clicked. In addition, many people who are using PPC to advertise will also install tracking software of their own to check the validity of the reports they get from their providers.

Further Reading

• Google Adwords
• Yahoo! Search Marketing