Paid Search - Mixpanel
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Paid Search

Last edited: Jul 19, 2021

Paid search is a digital marketing strategy that advertisers use to get their ads to appear in search engine results, like Google and Bing. A paid search ad campaign is one of the best ways to reach high-value leads. The most popular form of paid search is the pay-per click model.

What is Paid Search?

There are two types of search engine results: organic and paid. When consumers type keywords into a search engine, they’ll see a list of results. The top of the search engine results page (or SERP) will typically feature a block of display ads like these sponsored, paid search advertisements for ergonomic office chairs:

In Google, the word “Sponsored” hovers at the top of a block of display ads. Other search engines have a similar way of making paid results stand apart from organic results. Below display ads are a list of sponsored links and text ads, like these:

The “paid search” links here have a small “Ad” icon. Finally, below sponsored links, you’ll see a list of organic search results. For an organic search, businesses use search engine optimization (SEO) to get links to appear high up on SERPs, preferably in one of the top positions on the first results page. 

The purpose of search engine marketing (SEM) is to drive qualified leads to your site.

How Does Paid Search Work?

Paid search is an advertising strategies, such as pay-per-click (PPC). PPC is a type of ad campaign in which an advertiser pays a fee each time someone clicks on their display ad or sponsored link. On a search engine like Google, advertisers bid for their ad to appear on SERPs. What makes this type of advertising so unique, though, is that the business isn’t simply paying for ad space — like with a banner ad — but rather, they’re bidding on specific keywords. So when a customer types in those keywords, Google will only display ads on SERPs from advertisers that bid on those keywords. 

In other words, paid search is a way for you to promote your business directly to a relevant and engaged audience who are actively in search of your product or services. If these searchers aren’t ready to convert, then they’re the next best thing.  

Consider this example: A mom types “graduation cakes” into Google. The top PPC ads on her results page might feature local ads for bakeries near her location. Note that paid search ads for graduation cakes won’t show up for a person searching for keywords like “bookkeeping software” or “vacations in Florida.” The “graduation cakes” ads will reach Mom, though, a relevant, engaged, and high-value lead who may already be in the price-comparison stage of her graduation cake purchase. Some moms may even be searching for cakes from the parking lot at work and ready to drive to the bakery on her way home.

The Cost of Paid Search

First, there’s no one-size-fits all answer to how much a paid search ad campaign costs. While some industries can pay pennies-per click, businesses in very competitive categories can spend hundreds of dollars per click. But there is a misconception that because businesses pay a fee each time someone clicks on their ad, that a PPC ad can cost a fortune. It’s simply not true. Advertisers actually have a lot of control over their budget and can adjust costs based on ROI. One rule of thumb is that your cost-per-click is a percentage of the conversion. So even if you are in a competitive field, such as financial services, and pay a couple hundred dollars per ad click, it should be a fraction of the fee you collect when you retain your new client.

If you’re wondering if paid search actually works, consider that confidence in paid-search outcomes is at an all-time high.  According to eMarketer, advertisers in the U.S. paid 22.5% more for paid ads in 2019 compared to the previous year. And that number is expected to increase year over year.  

Why you should use paid search

The most advantageous thing about paid search is that your company or product is guaranteed to appear at the top of SERPs and, specifically, results for highly-qualified leads. If you’re worried that your text link or display ad will lose value next to the word “ad” or “sponsored,” this may change your mind: Many searchers don’t necessarily know, or even care, if the link they’re clicking is an ad. According to an Ofcom report about media use, attitudes, and literacy, “half of search engine users are unable to correctly identify ads or sponsored links at the top of many results pages.” People simply want quality search results. 

Tracking results

Paid search results are easy to track and adjust throughout your campaign. Display ad platforms, like Google Adwords, Facebook Ads, Bing Ads, and Outbrain have analytics tools, like tracking clicks, cost per click, and sales conversions, that can help you in pursuit of maximizing your return on investment (ROI). 

Here are just a few of the metrics you will need to know when analyzing your paid search campaigns:

Average cost per click (CPC): The average cost paid per actual click.

Clicks: The number of times users click on your display or text ad.

Click-through rate (CTR): Percentage of leads that clicked on your ad, which is calculated by dividing cicks by impressions. Your CTR indicates how well your ads are performing. (The higher the better.)

Conversion rate: The percentage of customers that clicked on your ad and converted.

Conversions: The number of customers that completed a conversion after clicking on your ad (e.g., actual purchases or visitors to your site).

Impressions: When your ads are shown. (It does not necessarily mean your ads were seen.)

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