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. Thepublisher has a rate that determines the cost per click or CPC based onthe competition of the term, meaning how many other people want to payfor that click too.

Terms such as "Austin, TX PPC" or "PPC Austin, TX" will have a costbased upon how many other websites are using those keyphrases to drivetraffic to their sites. Another determination of cost is often relatedto the content on webpages, if you have content that attracts morevaluable visitors it will cost more for that click-thru than contentthat attracts less valuable visitors. However, in many cases you canwork with the publisher for lower rates, especially when you have a longterm, high-value contract.

The flat-rate model is particularly common to price comparisonwebsites like PriceGrabber, eBay and Kelkoo which typically publishrates for particular keywords and phrases. However, these too arenegotiable and advertisers can pay more to get their sites to the top ofthe page.
Since these sites are compartmentalized into product or servicecategories they are highly targeted so you have a better chance ofgetting a customer from someone shopping on these sites because thatconsumer is farther along in the buying process, meaning they alreadyknow 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 themto compete against other advertisers in an advertising network such asGoogle AdWords or Microsoft AdCenter. Each advertiser sets the maximumamount that he or she is willing to pay in an auction for a given adspot based on a keyword . The auction proceeds automatically by avisitor 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, theday and time of the search, etc. are then compared and the winnerdetermined. If there are multiple ad spots which there usually are therecan be multiple winners whose positions on the page are determined bythe amount each has bid. The ad with the highest bid generally shows upfirst, but again additional factors like ad quality often comes intoplay.

In addition to ad spots on SERPs, the major advertising networks havepartnerships with 3rd party sites for contextual ads to be placed likethe ads that show up on blogs. Those sites are 3rd party partners of thebig search engines. Blogs, for instance, sign up to host ads on behalfof the ad network. These 3rd party websites are often referred to as acontent networks and the ads on them as contextual ads because the adspots are associated with keywords based on the context of the page.

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

To maximize success and achieve scale, you can hire someone to manageyour PPC campaigns for you or have the process fully automated by a bidmanagement system. These systems are more commonly used by advertisingagencies 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, thenyou can target the more "ready to buy" consumer directly on the SERPwith a flat-rate ad. If you are still testing keywords out or have lessto spend on PPC than on other advertising channels, start out biddingon 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'sinterest , search query intent, location, and the day and time they arebrowsing. Remember this is an ever-changing and constantly evolvingindustry, so don't be afraid to experiment (after you've done someresearch).