Pay per click (PPC) is an online advertising model found in search engines and content websites. Usually, advertising expenditure is based on the number of clicks on an advertisement that leads users to the advertiser’s website.

Typically, advertising on search engines would require advertisers to bid on keywords or keyword phrases that are relevant to their target market.

Also referred to as sponsored links or sponsor ads, these advertisements are displayed on web pages with relevant content and on search results pages when users make an inquiry using the advertiser’s keyword list.

Cost per click
Among the many PPC providers, Google AdWords, Yahoo! Search Marketing and Microsoft adCenter are the top operators as of 2007.

Cost per click (CPC) is dependent on two things—the popularity of the search engine and the level of competition for a particular keyword list or keyword phrase.

While CPCs can go as low as $0.01, popular keywords will definitely cost more when placed on popular search engines.

This is very important to know because your competitors could be targeting popular keywords and spending a big chunck of their budget on popular words, whereas niche keywords will have less competition but significant enough traffic and cost less.

You can potentially shave off hundreds of €/$ off your PPC spend but still have the same amount of traffic by doing some research beforehand rather than just going for the “big” phrases.
Knowing your market
Knowing your market beyond demographic attributes can do wonders for your advertising. Knowing the different ways how your target market refers to your product or company can help you determine which keywords to use.

This could also give you information on how the market refers to your competitors, so that you can avoid bidding for the same keywords, and channel your budget towards niche keywords that are more relevant to your market.

Keyword suggestion tools
There are a number of keyword suggestion tools that you can use for free. These can help you determine the best keywords for your ads to make sure they appear with relevant search results.

Keyword suggestion tools allow you to find out the most popular terms relevant to the industry you belong to.

Testing your ads
One big advantage of PPC is that your ads can be published almost immediately. Meaning, as soon as you roll out your PPC campaign, web surfers can already click your ads.

However, like advertising campaigns for other media, it is still advisable to test your PPC ads to see whether or not you have chosen the most suitable keywords.

Testing can be carried out through search engines like Google to see how well your ads can reach the target market.

A big chunk of your campaign’s success rides on the performance of the search engine. The most ideal engines are the ones that allow you to monitor your ads’ performance and provide you with a reliable customer support system.

Be Aware of Click Fraud
The pay per click advertising model is susceptible to click fraud.

Because the internet is a world wide medium, the opportunity for competitors to click on your ads is there.

Why would anyone do that? Well, by competitors clicking on your ads they drive up your PPC spend with the goal of getting rid of your ads off the net.

However, popular and reliable search engines, including the top three, have already implemented automated systems to protect advertisers from abusive clicking.

Useful Web Sites
These are sites and tools I use on a daily basis. The Google and SEO Book tool are 100% free. Wordtracker is $250 per year and is invaluable when researching keyword niches.

Google Adwords Keyword Tool - A free tool you can use to research the value of keywords.
https://adwords.google.com/select/KeywordToolExternal

Wordtracker - A subscription based online tool to research keywords
http://www.wordtracker.com

SEO Book Keyword Suggestion Tool - Free keyword suggestion tool which cross analyses, yahoo, msn, google.
http://tools.seobook.com/keyword-tools/seobook/