PAY PER CLICK

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pay per click

Pay per click, along with cost per impression and cost per order, are used to assess the cost effectiveness and profitability of internet marketing. Pay-per-click has an advantage over cost per impression in that it tells us something about how effective the advertising was. Clicks are a way to measure attention and interest. If the main purpose of an ad is to generate a click, then pay-per-click is the preferred metric. Once a certain number of web impressions are achieved, the quality and placement of the advertisement will affect click through rates and the resulting pay-per-click.

Pay per click is calculated by dividing the advertising cost by the number of clicks generated by an advertisement. The basic formula is:

Pay-per-click ($) = Advertising cost ($) ÷ Ads clicked (#)

There are two primary models for determining pay per click: flat-rate and bid-based. In both cases, the advertiser must consider the potential value of a click from a given source. This value is based on the type of individual the advertiser is expecting to receive as a visitor to his or her website, and what the advertiser can gain from that visit, usually revenue, both in the short term as well as in the long term. As with other forms of advertising targeting is key, and factors that often play into PPC campaigns include the target’s interest (often defined by a search term they have entered into a search engine, or the content of a page that they are browsing), intent (e.g., to purchase or not), location (for geo targeting), and the day and time that they are browsing.

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