PPC stands for “pay-per-click.”

This means that you pay only if a user clicks on your ad. (That click, of course, takes the user to your website.) If your ad merely appears on a web page, and no one clicks on it, you pay nothing.

How does the search engine — let’s assume it’s Google — determine how much to charge you for a click?

When you set up your pay-per-click campaign, you set a maximum bid — this tells Google the highest amount you’re willing to pay if someone clicks on your ad.

For this example, let’s say you’re going to set a bid for each keyword in your PPC campaign — there are other ways to set bids, but we’ll examine those in a future post.

Now let’s say that you’re willing to pay $2 for a click on a particular keyword’s ad. Then let’s say that, among your competitors for the same keyword, the next highest bid is $1. If a user clicks on your ad, you will only pay $1, even though you’re willing to pay $2.

In other words, it’s an auction.

For more about keywords, see our earlier post entitled “What’s a Keyword, Anyway?”

In pay-per-click advertising, you want a strong list of keywords – words and phrases that, when people search on them, will bring up your ad on the search engine.

But you also want a strong list of negative keywords – words and phrases that, when people search on them, will prevent your ad from showing on the search engine. Negative keywords are filters to prevent your ads from showing on searches which aren’t likely to help your business.

Let’s say you sell men’s and women’s shoes online. “Buy shoes” would be a good keyword to bid on in order to drive a lot of traffic to your ecommerce website.

But what if someone searches on “buy horse shoes”? Since you don’t sell horse shoes, you don’t want that search query to bring up one of your pay-per-plick ads.

In order to prevent this, you can add “horse shoes” to your negative keyword list. If you don’t, you run the risk that one of your ads will come up for “buy horse shoes” and someone will click on the ad — and you’ll pay for a useless lead.

A good way to begin your list of negative keywords is to think of all the calls you’ve received from people asking if your business provides a service that it doesn’t provide. If you sell shoes but don’t repair them, and people have called asking whether you repair shoes, then “repair” would be a good negative keyword.

Also, if you’re on Google (and of course you are), make sure to look regularly at the Search Query Report to know what search terms are triggering your ads.