Paid Search Advertising (PPC): How it Works

When done correctly, paid search can be one of the most cost-effective ways to drive leads and sales growth for your business. 

For many industries, the best way to reach potential customers who are ready to buy is with paid search advertising.  Simply put, paid search advertising or PPC can be one of the most cost-effective ways to drive leads and sales growth for your business.

The digital marketing and online advertising landscape have grown exponentially over the last decade, offering various options from paid video to display ads and paid social media marketing.

Add in the different names paid search goes by — paid search, pay-per-click (PPC), search engine marketing (SEM), or search engine advertising — and you can become overwhelmed before you even get started.

Don’t worry. New Path is here to help. But, first, let’s break down what paid search is, how it works, and how it’s different from SEO.

What is Paid Search Advertising?

Paid search is a form of digital media buying where you pay search engines such as Google or Bing for ad space on their search engine results page (SERP).

To best understand paid search advertising, first, you need to understand these 4-pillars of any PPC campaign:

  1. Keywords – The paid search ecosystem centers around keywords. Keywords represent a user’s wants or needs.  The way a person searches for a product or service will often provide insight into where that person is on their buyer’s journey.
  2. Ads – Paid search ads are text-based advertisements that typically appear above and below organic search results on a search engine results page. They can also appear on Google Maps, besides local listings, YouTube, and other keyword-related environments.
  3. Campaign structure & targeting – Campaigns and ad groups organize paid search campaigns. The campaign level is where you set daily budgets and other targeting criteria (Geography, day-part, etc.).  Ad groups will go under a campaign to group similar keywords with the most relevant ad text.  You can also control bidding and other tracking parameters at the ad group level.
  4. Bidding – Pay-per-click works just like it sounds. You only pay when someone clicks on your ad. What’s even better, you can set a maximum bid for each keyword to ensure you never pay than you want for a click.

How Does Paid Search Work?

The paid search process begins when an advertiser or an advertiser’s digital advertising agency identifies keywords that can drive business value.  From there, maximum bids are set for each of the selected keywords.

Paid search uses an auction system to determine which ads show on the SERP.  The auction results also dictate how the ads rank.  It’s important to note that bidding more for a keyword than a competitor won’t guarantee a higher ranking. When determining your ad rank, a keywords’ quality score and the maximum bid will determine where you rank.

How are Paid Search Ads Ranked?

When ranking an ad, search engines use two factors – maximum bid and quality score.   The maximum bid is straightforward.  It’s how much you are willing to pay if someone clicks on your ad. The quality score is more involved and is affected by keyword and ad relevance, landing page experience, and expected click-thru rate (CTR).

 Three major PPC ad components to focus on are:

  1. Landing Page Experience – The landing page is an essential part of your ad. Ensure your landing page is relevant to the keyword search, provides a fast and seamless user experience, and delivers what the ad text promises.
  2. Ad Relevance – Searchers are looking for specific products, services, and information, so your ad needs to be highly targeted and relevant to users.
  3. Expected Click-Thru Rate (CTR) – How likely is your ad to be clicked on? Google estimates CTR on your historical performance, similar advertisers’ historical performance, and the Google Ads features you use.

 What is the Difference Between Paid Search and Organic Search?

Organic search results appear on the same page with paid search ads. However, instead of placing bids and paying-per-click to appear, you earn organic search results by investing in Search Engine Optimization (SEO). Organic results are free listings that appear in search engine results pages (SERPs) because it’s relevant to someone’s search terms. Businesses use SEO to optimize their site’s visibility or rankings in search results.

So, organic search marketing is the better option? Not necessarily. There is still a cost-per-click (CPC) to SEO.

SEO takes time. Depending on how established your website is and the popularity of keywords you want to rank higher for, it can take months or even years to get in the top 10 results. Every hour you, your employees, or your digital marketing agency spend working on SEO content costs money.

On the other hand, paid search allows your ads to show up almost immediately at the top of page one for the keywords most important to your business.

In today’s digital-first marketplace, thriving businesses use paid search advertising and search engine optimization strategies to gain an advantage over the competition.

Learn more about Search Engine Optimization (SEO) and why it matters.

Learn more about Paid Search Advertising (PPC) and why you need it.

Not sure where to start or what questions to ask?  We developed our pathfinder™ process just for you.



Paid search advertising can be one of the most cost-effective ways to drive growth for your business. This guide will break down what paid search is, how it works, and how it’s different from SEO.

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