If you are starting an internet business, you probably know very little about internet marketing. There are several different ways that you can get traffic to your site, but for the purposes of this discussion, we are going to focus on pay per click marketing, which has become the most popular way to advertise an online business.

What is pay per click? Well, go to Google, and then type in a keyword or phrase that you want to search for. Then, at the top of the search results, you will see a section for what is called sponsored links or sponsored results. These sponsored links are paying a certain cost per click to be listed in this special section at the top of the listings. Each one of these websites pays a certain fee to Google each time someone clicks through to their site.

Each website that uses pay per click (PPC) has to place a bid on how much they are willing to spend per click for a certain keyword. The highest bidder is placed in the number one position, the second highest bidder is placed in the number two position, and so forth. Also, each bidder specifies how much they are willing to spend per day. Once their daily budget has been exhausted, the site is removed from the sponsored results until the beginning of the next 24-hour period.

Google is not the only search engine that has a PPC service available. Overture also has a service, as does Miva, and several others. Each service is tied to different search engines. If you use PPC with Google, your website will be listed on Google, AOL Search, and Ask.com. If you sign up for Overture, you will be listed on engines such as Yahoo, MSN, Netscape, and several others. Miva is tied to approximately 6 different search engines.

PPC marketing is expensive, especially if you are bidding on a highly sought after keyword or phrase. Keywords related to auto insurance, or mortgage quotes, can cost anywhere between $1 - $20 per click or even more if you want to be ranked in the top position. If the keyword you want to advertise for is not too popular, the click costs will be much less.

It is possible to spend thousands dollars on pay per click and make zero sales of the product or service you are selling. Conversion rates for PPC marketing are usually 2%-5%, meaning that only 2%-5% of the people who come to your website will actually order what you are selling. So, you need to take that into account when developing your marketing strategy. For example, if you have an online business where you sell DVD players and you spend $5 per click with a maximum budget of $500 per day for clicks received, that means you will receive 100 clicks per day ($500 / $5 = 100 clicks). If a single DVD player costs $200, and only 2% of the people who visit your website place an order, then you will receive 2 orders per day (100 clicks with a 2% conversion rate equals 2 sales). This means that you will make $400 per day, but your daily advertising expense is $500. So, you have a net loss of $100 per day. So, PPC advertising can be quite costly if it is not done carefully.

To try to generate a net profit with your PPC marketing efforts, you need to take into account that most people using a search engine are only looking for information, and are not planning on buying any products or services. So, make sure you bid on a keyword that will bring you customers who are looking to make a purchase and are not there just to gather information. For example, if you are selling vitamins on your website, and you bid on the keyword VITAMINS, you will receive a lot of traffic from people who will use your website merely to read about vitamins. Instead, you should bid on the phrase BUY VITAMINS. In this manner, you will only receive qualified traffic from people that are looking to buy vitamins, which will increase your sales and allow you to get more bang for your marketing buck.

PPC advertising is not necessarily appropriate for every online business. You need to have a lot of cash to burn in order to compete with the bigger businesses who are spending hundreds of thousands of dollars per month on pay per click. If you are operating a website for a small business, you need to diversify your internet marketing efforts by optimizing your website and increasing your link popularity so you can climb to the top of the search engines without having to pay for every click you receive. Also, you should consider having an affiliate program so that other websites will promote your business for free as long as you pay them a commission for any referrals they produce. The best way to approach internet marketing is to use several different methods that when put together result in an optimal cost situation for your business and attract a significant amount of targeted traffic to your website.