The amount of traffic provided to each advertiser depends on how prominently their adverts are shown. The sponsored results shown above the organic listings tend to have much higher amounts of traffic, making them the preferred advert location. Although not strictly proportional, the higher the adverts position on the page, the more people tend to click on the advert. As such, Adwords ranks the adverts with the most desirable at the top of the page, and the less desirable being near the bottom or not even on the first page of results.

The ranking of adverts is based on many factors with the most important being bid price and quality index where the quality index is made up of factors like the advert click through rate (CTR). There is a great skill in being able to reduce bid prices whilst ranking highly by boosting the quality score for an advert.

Google Adwords is not the only pay per click service, but it is by far the biggest with current estimates putting its market share at 85%-90%. The biggest competitors in the UK are Yahoo Search Marketing (the new name for Goto.com who were bought out by Overture) and Microsoft Adcenter.

• One-time payment – A one off payment is made in return for an advert being shown on that site for ever. Lots of online directories work in this way, indexing sites and charging a fee in return.
• CPM (cost per impression) – Advertisers pay a fixed rate for every 1000 times their adverts are shown. This is most effective for improving brand awareness as there are no guarantees that anybody will click on the link and visit the destination page. The price paid depends on many factors such as the prominence of the position on the page where the advert will be shown, the sites the adverts will be shown on and the estimated amount of traffic which can be provided.
• CPC/PPC (cost per click/pay per click) – Advertisers pay for each visitor that is sent to their site. Instead of paying for a particular listing or advert to be shown, they are only charged when people attracted to the advert click on it and are delivered to the advertiser’s page.
• CPA (cost per action) – This is the basis of affiliate marketing where affiliates only get paid a commission when the customer they refer goes on to make a purchase. An action can be a sale,  lead or signup but all of these work in the same way.
• CPE (cost per engagement) – A very new term to do with interactive adverts where an advertiser only gets charged when a visitor to a site interacts with a banner in some way.
• Email advertising – This can be billed in a number of ways, but involves sending emails to potential customers. Advertisers can pay for the number of emails sent, the number actually read (often a lot lower) or in many other ways.

All of the above have different pros and cons, which will be covered in more depth over the next few posts.