At its most elemental, pay per click refers to a form of advertisement in which the company advertising itself pays the website where the ad is displayed for each time the ad is clicked, and only for times the ad is clicked. There is no flat fee; an ad that generates many clicks will cost more than an ad that viewers don’t click on. Formula-wise, the most fundamental calculation goes thusly: Pay per click ($) = Advertising cost ($) ÷ Ads clicked (#)
The advantage to pay per click is efficiency. Small businesses can’t afford to pay a lot of money to park an advertisement on a site and let it sit there, hoping it generates interest. With pay per click, you pay only for interactions with likely customers. Also, having pay per click ads on multiple websites can help business owners compare and contrast, thus determining which venues are good advertisement sites and which are not.
Now, one potential downside to pay per click advertising is that in the past, it’s been ripe for “click abuse,” or click numbers that are artificially inflated so as to amplify the cost. Search engines, like Google and Yahoo, have made strides in preventing click abuse, however.
These are only the very basic contours of pay per click advertising, but hopefully, this post has shown why pay per click advertising is an effective model for many small businesses.