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The First PPC Revolution by Google

Aug 23, 2007
It is really impossible to talk about PPCs (Pay per Click) without mentioning Adword. Adword is Google's trade name for their PPC arm of business. It is a fact that quite a number of advertisers exclusively use Adwords to advertise online. Here we look at the first of the two major changes that Adword introduced into the PPC world that have launched it to the top of online advertising companies; the Click Through Rate (CTR).

Though PPC as birthed by GoTo was revolutionary in itself, the entry of Adwords seemed to have fine tuned the concept with great success. Goto used the process of bidding to determine the order of listing of competing advertisers. For example, let's say two airlines were competing for online business for Europe-Mombasa route. You would expect both companies to bid for the keyword phrase "air ticket mombasa". This would mean every time a surfer was to search for these keyword phrase in a search engine they would see these adverts. However the airline that bids more for the keyword would always be listed above the other. If they bid equally, the first one to bid would be listed on top.

Unfortunately, with money as the only factor, bidding had an unfair advantage to the big companies that have large budgets. They could even afford to wage a loss ad campaign just to smoother competition from small businesses that make-up the majority of internet businesses.

By introducing a factor known as Click Through Rate (CTR) to the bidding process Adword managed to instill more competition into the bidding process. It was no longer just about more money. CTR is a percentage of how often an ad is clicked on in relation to the number of times it has been displayed. A CTR of 0.5% means an ad is clicked once for every 200 displays. Adword lists ads depending on bid price as well as CTR.

CTR depends on how effectively the ad has been written. The more an ad resonates with the surfers, the more they click on it and the higher the CTR. As a result smart buying of leads or visitors to your website involves designing effective ads that attract the click. This is giving small businesses willing to work smart a fair opportunity against the more financially endowed competitors. However one can still pay their way to the highest position. If they have a very poor CTR they can make up for it by bidding even more.

In such a case it would mean that they are buying the same lead at a much higher cost than the smart marketer who takes time to design an ad with a higher CTR. The introduction of CTR by Adword widened the gap between smart marketers and the not so smart.
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