What is PPC advertising and when is it actually worth it
PPC is not “ads on Google”. It is an auction where you pay for attention — and it only pays off when you know your margin and people are actively searching for what you sell. Here is the whole mechanism without the gloss.
- PPC is an auction, not a purchase of positions: placement comes from bid × quality, so paying more is not enough on its own.
- Whether PPC pays off is decided by gross margin on one order, not by the size of the budget.
- Without measurement that matches real orders a campaign cannot be optimised — only made more expensive.
PPC stands for pay per click. People see the ad for free; you pay only when someone clicks. That is the whole definition and also the least interesting thing about the discipline. What matters is what happens between the moment someone types a query and the moment your ad appears. That is not buying ad space. It is an auction that runs a hundred times a second and that you cannot win simply by offering more money.
This article is the entry point to our whole library. It does not explain which box to tick — other articles do that. It explains the mechanism, and above all how to tell in advance whether launching PPC makes sense at all.
What counts as PPC
In everyday use the term covers all paid performance advertising. In practice it hides four very different things that share only the way you pay:
- Search advertising. Text ads above the results on Google and Microsoft Bing. It reacts to existing demand: someone is already looking, and you show up. The dearest per click, the cheapest per conversion.
- Shopping (product) advertising. Products with an image, price and shop name. It is driven by a product feed, not by keywords. For online shops it is usually the largest source of revenue from ads.
- Display and video. Banners on websites and ads on YouTube. It does not react to demand but creates it — which is exactly why it is the hardest to evaluate.
- Social advertising. Meta (Facebook, Instagram), LinkedIn, TikTok. It targets people by behaviour and interests, not by a query. Formally often paid per impression rather than per click, but it belongs to the same family.
The difference is not a technical detail. A channel that reacts to demand (search) and a channel that creates it (video, social) are judged by different metrics and deserve different budgets. Mixing them into one report and watching a single return figure is one of the most common mistakes we see in accounts.
How the auction works (and why the highest bid does not win)
When someone enters a query, the system finds every ad that could appear for it and ranks them. What decides is not only how much you are willing to pay. Google and Microsoft combine your bid with an estimate of quality: how likely someone is to click, how well the ad matches the query, and how good the page it leads to is.
Simplified, it looks like this:
Ad rank ≈ maximum bid × quality. The actual cost of the click is then derived from the bid of the competitor below you — not from your own.
Three practical consequences worth remembering:
- A better ad is a cheaper ad. When your ad and page match the query better than the competition, you get the same position for less. Work on copy and landing pages is therefore a form of cost reduction, not just “creative”.
- You pay less than you bid. The bid is a ceiling, not a price. That is why it pays to talk about real CPC from the account rather than estimates from a keyword planner.
- You cannot buy your way out of irrelevance. If quality is low, the system either does not show the ad or charges so much that it stops making sense.
Today you rarely set bids by hand anyway. You set a target (a cost per conversion or a return) and an automated strategy calculates bids for you. That does not change the logic of the auction, but it moves your work: instead of bids you manage targets, data, and which queries you let into the campaigns at all.
The vocabulary you cannot discuss PPC without
The terms you need straight away. For each we also note what the metric is useless for — that is where mistakes happen most.
| Term | What it is | What it is NOT |
|---|---|---|
| CPC | The cost per click you actually pay | Not a measure of success. Cheap clicks from irrelevant queries cost more than dear clicks from the right ones. |
| CTR | Share of impressions that turn into clicks | Not a business metric. It can be inflated with a discount in the headline that destroys the margin. |
| Conversion | The action you define as the goal (order, enquiry, call) | Not the same as an order in your system. If the two do not match, everything else is inaccurate. |
| CPA | Cost per conversion | Not the cost of the next customer. The decision to add budget is governed by marginal CPA, which is always higher. |
| ROAS | Revenue divided by ad spend | Not profit. It ignores margin, so a ROAS of 6 can be a loss or a win depending on the field. |
| Cost of sale | Spend as a share of revenue — the inverse of ROAS | Not comparable across industries. The only valid ceiling is the one your own margin implies. |
| Impression share | How much of the available impressions you captured | Not a goal. One hundred per cent impression share loses money for most accounts. |
We go through this in detail in ROAS, CPA, CAC and LTV: which number actually decides.
When PPC pays off
It is not a question of company size or budget. Four conditions decide, and it is enough for one to be missing.
1. The demand exists
In search you can only reach people who are looking for something. If nobody searches for your product because they do not know it exists, search advertising has nothing to build on. Such a product can be sold through content or social channels, but that is a different discipline with different numbers and a longer horizon.
2. You know your gross margin
This is the most common reason a conversation about PPC ends before it starts. The gross margin on one order is the absolute ceiling on what you can pay to win it. Without that number you cannot say whether a CPA of €16 is good or catastrophic.
Agency and client start negotiating a “reasonable cost of sale” based on the industry. That is an average of other companies with a different cost structure. We have seen shops proudly holding cost of sale at 8 % while running an 10 % margin — every order from ads was taking money off them, nobody was counting.
3. You can measure what happened
A campaign with broken measurement does not get optimised, it only gets more expensive: the algorithm dutifully produces more of whatever you label as success. If a cart view counts as a conversion, you will get a lot of cart views. The minimum is to compare the number of conversions in the ad platform with real orders over the same period. How to do that, and what makes it harder today, is in conversion tracking and Consent Mode v2.
4. The business can take more orders
Advertising is an amplifier. If you have delays in stock, overloaded tradespeople or a salesperson who cannot keep up with enquiries, added budget will only make it bigger. In fields with limited capacity the ceiling is more often in people than in demand.
When PPC does not pay off
The honest answer you will not usually find in agency articles:
- Margins of a few per cent on products that are identical everywhere and compete only on price. The auction will squeeze you: you will pay exactly what the margin is.
- Very little demand. When twenty people a month search your query in the whole country, you cannot build a channel on it. You can build a very expensive source of two orders.
- A budget that gathers no data. If a campaign does not produce at least a handful of conversions a month, you have nothing to optimise on and automated strategies have nothing to learn from. Better to narrow the scope and do one thing properly than five things by the drop.
- A broken site or checkout. Here the money is not just wasted — you also pay for an experience the customer will remember. Fix the landing page first.
What it costs and how to start
Concrete figures and the split between media and work are in How much does PPC cost. For orientation, just the frame: a budget is not worked out from what others spend, but backwards — from margin, from customer value, and from how many conversions a month you need before you can evaluate anything at all.
If you want to see where your own numbers land, try the budget calculator. It models the thing ordinary calculators ignore: that every further unit of budget earns less than the one before it.
What to take away
PPC is the most direct route to existing demand and also the discipline that most quickly reveals a company does not know its numbers. The approach we recommend, and use ourselves, is boring and in this order: find the margin, build measurement, start with the highest-intent queries, fix the site, and only then raise budget in steps with the expectation written down in advance.
Where we all most often fail in that order is covered in the most common mistakes in PPC.
Common questions
What does PPC stand for?
Pay per click. It is a model where the advertiser pays only when someone clicks the ad, not when it is shown. In everyday use the term covers performance advertising in general — search ads on Google and Microsoft Bing, shopping campaigns, display and video, and ads on social networks, even though some of those are actually billed per impression.
Is PPC better than SEO?
They are not competitors. PPC gives you a position immediately but stops the moment you turn the budget off. SEO takes months and holds without further payment. In practice they complement each other well: PPC quickly shows which queries actually lead to business, and SEO then builds on those for the long term. You only have to choose when the budget is too small for either.
What is the minimum budget for PPC advertising?
There is no technical minimum, but there is a sensible one: the budget has to produce enough conversions in a month for the result to be evaluated and for automated bidding to have something to learn from. The practical threshold therefore depends on the cost per click and conversion rate in your field. For a local service it may be a few hundred euros a month; for electronics or legal services, several thousand. When the budget is not enough for one theme, narrowing the scope beats splitting the money across five campaigns.
- Google Ads Benchmarks 2025: Competitive Data & Insights for Every Industry, WordStream by LocaliQThe most cited public benchmark for search advertising. US data, mostly lead generation, and medians across industries — it cannot be transferred directly to European e-commerce.