HOW DOES PAY PER CLICK ADVERTISING WORK?

At Lillian Purge, we specialise in Local SEO Services and have created a comprehensive guide on How Does Pay Per Click Advertising Work? to demystify the auction system and help you understand the mechanics behind successful campaigns.

Pay Per Click (PPC) advertising is a digital marketing model where advertisers pay a fee each time someone clicks on their ad. Rather than earning visits organically, you buy them through platforms like Google Ads, Bing Ads, or Meta Ads.

PPC allows your business to appear at the top of search results or across targeted websites immediately. This makes it a highly effective tool for driving traffic, generating leads, and boosting brand visibility while waiting for organic SEO efforts to take effect.

The most common form of PPC is search advertising, where ads appear above or below organic results when users type in specific keywords. However, PPC also includes display ads, video ads, shopping campaigns, and social media advertising.

How PPC works

Although the mechanics of PPC might seem complex, the process follows a clear structure. Here’s how it works step by step:

  1. Choose a platform – Most advertisers start with Google Ads, but you can also use Bing Ads, LinkedIn, Instagram, or Facebook depending on your audience.

  2. Select your keywords – You identify the search terms or audience segments you want your ads to appear for. For example, a Bedford-based plumber might target “emergency plumber Bedford” or “boiler repair near me.”

  3. Create your ad – You design a short, engaging advert that appears in search results or on relevant websites. It includes a headline, short description, and link to your landing page.

  4. Set your budget and bids – You decide how much you’re willing to spend per click and per day.

  5. Ad auction – Every time a user performs a search, Google runs an automated auction to determine which ads appear and in what order.

  6. User clicks and conversion – When someone clicks on your ad, they’re taken to your landing page, and you’re charged for that click. The goal is to convert that visit into an enquiry, purchase, or other desired action.

Understanding the ad auction

Every PPC ad placement is determined through an instant auction. When multiple advertisers target the same keyword, Google uses two main factors to decide whose ad appears:

  • Maximum bid – The highest amount you’re willing to pay for a click.

  • Quality Score – A rating out of 10 that measures the relevance and quality of your ad, keywords, and landing page.

Your Ad Rank is calculated by multiplying your bid by your Quality Score. Even if a competitor bids higher, a more relevant and better-performing ad can outrank theirs. This means success in PPC isn’t just about budget   it’s about creating well-optimised campaigns that deliver a good user experience.

What affects your Quality Score

Google assigns Quality Scores based on several performance factors:

  • Ad relevance – How closely your ad matches the user’s search intent.

  • Expected click-through rate (CTR) – How likely it is that people will click your ad.

  • Landing page experience – How useful, fast, and user-friendly your destination page is.

High-quality ads receive better placement and lower cost-per-click (CPC), meaning you can spend less to achieve the same results.

Types of PPC advertising

PPC is a flexible model that can be used across multiple channels and formats. The main types include:

1. Search Ads

These appear at the top of search engine results for specific keywords. They’re text-based and ideal for service businesses, local companies, and e-commerce sites looking to capture high-intent traffic.

2. Display Ads

These are visual banner or image-based ads that appear on websites within Google’s Display Network. They’re used for brand awareness, remarketing, or promoting offers to audiences who may not be actively searching yet.

3. Shopping Ads

Used primarily by e-commerce retailers, these ads showcase product images, prices, and descriptions directly in search results. They appear when users search for specific products, such as “Nike running shoes.”

4. Video Ads

Video campaigns, often run on YouTube, allow brands to promote products or services before, during, or after videos. These are effective for storytelling and brand awareness.

5. Social Media Ads

Platforms like Facebook, Instagram, LinkedIn, and TikTok allow precise audience targeting based on demographics, interests, and behaviours. This makes them ideal for building local engagement or promoting events.

How budgeting and bidding work

PPC gives you full control over your budget. You can choose between daily or monthly limits and adjust bids to control how much you’re willing to pay per click.

The most common bidding strategies include:

  • Manual CPC – You set maximum bids for each keyword manually.

  • Automated bidding – The platform adjusts bids automatically to achieve your chosen goal (such as maximising conversions).

  • Target CPA (Cost Per Acquisition) – Focuses on getting conversions at or below a set cost.

  • Target ROAS (Return on Ad Spend) – Optimises campaigns based on the revenue generated from each click.

Effective bid management is about balancing cost and value. Paying £2 for a click is worthwhile if that visitor converts into a £200 sale.

How PPC supports local businesses

For local companies, PPC is a fast and measurable way to reach nearby customers. Localised campaigns can target specific postcodes, towns, or radiuses around your business.

For example, a Bedford electrician could:

  • Use location targeting to show ads only within a 10-mile radius.

  • Include local keywords like “Bedford electrical services.”

  • Display a Google Maps extension to help customers find their business easily.

This hyper-focused approach ensures your budget is spent only on the people most likely to convert.

Measuring PPC performance

PPC platforms provide detailed analytics that show exactly how your ads perform. Key performance metrics include:

  • Impressions – How many times your ad was shown.

  • Clicks – The number of users who clicked on your ad.

  • Click-through rate (CTR) – The percentage of impressions that led to clicks.

  • Conversion rate – How many clicks turned into actions like purchases or form submissions.

  • Cost per conversion – How much you spent on average for each conversion.

By analysing these metrics, you can identify which ads, keywords, and audiences deliver the best return on investment.

Common PPC mistakes to avoid

While PPC is powerful, it can quickly become costly if not managed carefully. Common mistakes include:

  • Targeting keywords that are too broad or irrelevant.

  • Sending traffic to poorly optimised landing pages.

  • Ignoring negative keywords, which filter out unwanted searches.

  • Failing to track conversions properly.

  • Leaving campaigns on autopilot without regular adjustments.

Regular monitoring and optimisation are essential to ensure continued success and profitability.

The relationship between PPC and SEO

Although PPC and SEO are separate strategies, they work best together. PPC delivers immediate visibility and data, while SEO builds long-term organic growth. Insights from PPC campaigns   such as which keywords convert best   can inform your SEO strategy.

For example, if you find that “emergency plumber in Bedford” generates a high number of conversions in your PPC campaign, you can use that data to optimise your website content and meta titles for that same term.

When integrated, PPC and SEO create a strong full-funnel marketing approach that increases both short-term leads and long-term visibility.

Expert advice

To get the most from PPC, always start with clear goals and measurable metrics. Focus on relevance, quality, and data-driven decisions rather than chasing clicks alone. Regularly test different ad copy, landing page layouts, and keyword variations to improve results over time.

For local businesses, combining PPC with local SEO ensures you capture customers at every stage of their journey   from discovery to conversion.

Conclusion

Pay Per Click advertising is one of the most effective ways to reach potential customers quickly and predictably. By understanding how the system works, managing your bids strategically, and creating high-quality, relevant ads, you can drive targeted traffic and achieve strong returns. Whether you’re a small business targeting local clients or a larger brand looking for growth, PPC offers a flexible and measurable path to digital success.

We have also written in depth articles on Does Pay Per Click Really Work? and What is Pay Per Click Advertising? as well as our Pay Per Click Advertising Hub to give you further guidance.