How does it work? The major search engines offer bidding for the placement of your ad based on keywords. You bid on keywords that you want to place your ads on, related to your product. If you bid the highest, your ad goes first. When someone does a search for that keyword, your ad is available to them to click on. If they do, you are charged whatever you bid. For example, if you bid $.30 for a keyword to get top spot, and 100 people click on your ad in a day, you pay $30.00. Multiply that times 30 days and you can see how quickly your advertising budget gets expended. If it is a keyword that is very popular, and thousands of people click on your ad, it really costs you big.

But, you might ask, isn't a lot of click throughs what you are looking for? Isn't that a good thing? It depends. If those clickthroughs result in sales, yes, it is great. But, if sales don't result for a good percentage of those clickthroughs, then it is not a good thing at all.

One of the disadvantages to pay per click marketing is that your cost per click remains the same, regardless of traffic. Your overall costs go up in proportion to your clicks. But, in the normal search engine optimization, as your traffic increases, your costs go down. You spend a particular amount of time and money to optimize your site, and increased traffic doesn't raise your overall expenditure.

Is pay per click all bad? Not at all. It can profitably increase your search engine traffic, which increases your website traffic, if it is managed well. With some programs, such as Google Adwords, it can immediately increase your website traffic. If you are at the top of a popular keyword, you will get instant clickthroughs, and potentially, customers. Also, you can adjust your ad campaigns to match marketing trends a lot easier than you can rework your web content to draw search engine traffic.

What are some management tips? The most basic is to focus your efforts and to be well aware of what you are spending, your conversion rate, and your number of clickthroughs. Like any advertising method, you have to stay on top of what is going on or you can spend many wasted dollars in ineffective advertising.

When is pay per click a good idea? There are three major areas where pay per click advertising is beneficial.

Campaign and advertising testing issues. If you are introducing a new product, or if you want to test drive an advertising campaign, you can expect immediate traffic and can test ads by changing in mid-campaign and watching results.

Direct response sales – if you sell something that the customer can buy immediately, pay per click advertising may be beneficial. You know that each click through may be a sale.

When using a niche phrase – when a certain keyword might be expensive, a keyword phrase with that word combined with another one might be a real bargain and generate a lot of traffic.

Pay per click advertising is not the solution for everyone or every situation. But, managed well and used effectively, it can very efficiently drive website traffic and resulting sales.