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July 22, 2011

The Difference Between Flat Rate And Bid-Based PPC Campaigns

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Pay per click (PPC) campaigns are sometimes confusing. People also refer to it as cost per click (CPC), successful PPC campaigns involves keyword research and good tracking among other things.PPC can be expensive if there is a lot of competition for the keywords. When you’re paying for each click to your website, you want to make sure the research has been done. The following may help to explain the differences between the two types of PPC/CPC: flat rate & bid-based.

Flat Rate PPC

Flat Rate PPC is where the advertiser and publisher (search engine) agree upon a fixed amount that will be paid for each click. The publisher has a rate that determines the cost per click or CPC based on the competition of the term, meaning how many other people want to pay for that click too.

Terms such as “Austin, TX PPC” or “PPC Austin, TX” will have a cost based upon how many other websites are using those keyphrases to drive traffic to their sites. Another determination of cost is often related to the content on webpages, if you have content that attracts more valuable visitors it will cost more for that click-thru than content that attracts less valuable visitors. However, in many cases you can work with the publisher for lower rates, especially when you have a long term, high-value contract.

The flat-rate model is particularly common to price comparison websites like PriceGrabber, eBay and Kelkoo which typically publish rates for particular keywords and phrases. However, these too are negotiable and advertisers can pay more to get their sites to the top of the page.
Since these sites are compartmentalized into product or service categories they are highly targeted so you have a better chance of getting a customer from someone shopping on these sites because that consumer is farther along in the buying process, meaning they already know what they want and have come specifically to make a purchase.

Bid-based PPC

With Bid-based PPC, the advertiser signs a contract that allows them to compete against other advertisers in an advertising network such as Google AdWords or Microsoft AdCenter. Each advertiser sets the maximum amount that he or she is willing to pay in an auction for a given ad spot based on a keyword . The auction proceeds automatically by a visitor clicking on the ad spot that the search engine results page (SERP) displays.

All bids for the keyword that target the searcher’s geo-location, the day and time of the search, etc. are then compared and the winner determined. If there are multiple ad spots which there usually are there can be multiple winners whose positions on the page are determined by the amount each has bid. The ad with the highest bid generally shows up first, but again additional factors like ad quality often comes into play.

In addition to ad spots on SERPs, the major advertising networks have partnerships with 3rd party sites for contextual ads to be placed like the ads that show up on blogs. Those sites are 3rd party partners of the big search engines. Blogs, for instance, sign up to host ads on behalf of the ad network. These 3rd party websites are often referred to as a content networks and the ads on them as contextual ads because the ad spots are associated with keywords based on the context of the page.

Ads on the Google Display Network generally have a lower click thru rate (CTR) and a lower conversion rate (CR) than the straight search engine ads. But they can still be a good source of secondary income for the publisher and a cheaper source of advertising for you.

To maximize success and achieve scale, you can hire someone to manage your PPC campaigns for you or have the process fully automated by a bid management system. These systems are more commonly used by advertising agencies that offer PPC bid management as a service.

Which type will work for your business?

That depends on your budget. If you have more to spend on PPC, then you can target the more “ready to buy” consumer directly on the SERP with a flat-rate ad. If you are still testing keywords out or have less to spend on PPC than on other advertising channels, start out bidding on a few keyphrases and let the search engine syndicate them for you.

Or you can try your luck with a Google AdWords account.

Targeting is key as it is in other types of advertising.

Factors that often play into PPC campaigns include the target’s interest , search query intent, location, and the day and time they are browsing. Remember this is an ever-changing and constantly evolving industry, so don’t be afraid to experiment (after you’ve done some research).

Have some fun with it!


Brandon Clay has been involved in internet marketing since 03′. He currently owns Search Traffic Pro, a niche consultancy firm in Austin, Texas. His areas of expertise are search engine optimization (SEO), pay per click (PPC/SEM) advertising, social media, web analytics, and search marketing consulting If you need help gathering prospects, or help with PPC in Austin, (or anywhere for that matter) contact him at http://www.searchtrafficpro.com

2 Responses to “The Difference Between Flat Rate And Bid-Based PPC Campaigns

    Hi Brandon! Great article, and I would be very interested in hearing your views in the future on your thoughts regarding Flat Rate PPC vs Bid PPC vs “Impression” advertising, and if you feel there are any particular pro’s and con’s of each. This article is a must read for any business thinking of starting an ad campaign. Thanks!

    […] Pro news does and excellent breakdown of the two categories of PPC which could be found here (http://www.sitepronews.com/2011/07/22/the-difference-between-flat-rate-and-bid-based-ppc-campaigns/). Essentially, Flat-rate PPC is exactly what it sounds like. The advertiser has an agreement with […]

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