Purpose[edit]
Pay-per-click, along with cost per impression (CPM) and cost per order, is used to assess the cost-effectiveness and profitability of internet marketing and drive the cost of running an advertisement campaign as low as possible while retaining set goals.[7] In Cost Per Thousand Impressions (CPM), the advertiser only pays for every 1000 impressions of the ad. Pay-per-click (PPC) has an advantage over cost-per-impression in that it conveys information 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, or more specifically drive traffic to a destination, then pay-per-click is the preferred metric. The quality and placement of the advertisement will affect click through rates and the resulting total pay-per-click cost.
History[edit]
There are several sites that claim to be the first PPC model on the web,[11] with many appearing in the mid-1990s. For example, in 1996, the first known and documented version of a PPC was included in a web directory called Planet Oasis. This was a desktop application featuring links to informational and commercial websites, and it was developed by Ark Interface II, a division of Packard Bell NEC Computers. The initial reactions from commercial companies to Ark Interface II's "pay-per-visit" model were skeptical, however.[12] By the end of 1997, over 400 major brands were paying between $.005 to $.25 per click plus a placement fee.
In February 1998 Jeffrey Brewer of Goto.com, a 25-employee startup company (later Overture, now part of Yahoo!), presented a pay per click search engine proof-of-concept to the TED conference in California.[13] This presentation and the events that followed created the PPC advertising system. Credit for the concept of the PPC model is generally given to Idealab and Goto.com founder Bill Gross.[14]
Google started search engine advertising in December 1999. It was not until October 2000 that the AdWords system was introduced, allowing advertisers to create text ads for placement on the Google search engine. However, PPC was only introduced in 2002; until then, advertisements were charged at cost-per-thousand impressions or Cost per mille (CPM). Overture has filed a patent infringement lawsuit against Google, saying the rival search service overstepped its bounds with its ad-placement tools.[15]
Although GoTo.com started PPC in 1998, Yahoo! did not start syndicating GoTo.com (later Overture) advertisers until November 2001.[16] Prior to this, Yahoo's primary source of SERPs advertising included contextual IAB advertising units (mainly 468x60 display ads). When the syndication contract with Yahoo! was up for renewal in July 2003, Yahoo! announced its intent to acquire Overture for $1.63 billion.[17] Today, companies such as adMarketplace, ValueClick and acknowledge offering PPC services, as an alternative to AdWords and AdCenter.
Among PPC providers, Google Ads (formerly Google AdWords), Microsoft adCenter and Yahoo! Search Marketing had been the three largest network operators, all three operating under a bid-based model.[3] For example, in the year 2014, PPC(AdWords) or online advertising attributed approximately US$45 billion of the total US$66 billion of Google's annual revenue[18] In 2010, Yahoo and Microsoft launched their combined effort against Google, and Microsoft's Bing began to be the search engine that Yahoo used to provide its search results.[19] Since they joined forces, their PPC platform was renamed AdCenter. Their combined network of third-party sites that allow AdCenter ads to populate banner and text ads on their site is called BingAds.[20]
Legal[edit]
In 2012, Google was initially ruled to have engaged in misleading and deceptive conduct by the Australian Competition & Consumer Commission (ACCC) in possibly the first legal case of its kind. The ACCC ruled that Google was responsible for the content of its sponsored AdWords ads that had shown links to a car sales website Carsales. The ads had been shown by Google in response to a search for Honda Australia. The ACCC said the ads were deceptive, as they suggested Carsales was connected to the Honda company. The ruling was later overturned when Google appealed to the High Court of Australia. Google was found not liable for the misleading advertisements run through AdWords despite the fact that the ads were served up by Google and created using the company's tools.[25]