What is a PPC? A Simple Guide

What You Pay for a Click
How the Ad Auction Works

PPC, short for pay-per-click, is online advertising where you pay when someone clicks your ad. On a search engine, you choose the searches your ad can appear for and the highest price you'll pay for a click, and an auction decides whether your ad shows, and where, each time someone searches. This page explains that auction, what you're charged, and what Quality Score and clickthrough rate measure.

Billed publishes this page. Google Ads facts are quoted from Google Ads Help, checked October 31, 2026. The worked example uses sample figures.

For budgets, and for deciding if PPC suits your business, see benefits of PPC for small business. For campaigns aimed at other businesses, see the role of PPC in B2B marketing.

What You Pay for a Click

You set a ceiling, and the auction sets the price. Google Ads Help defines a maximum CPC bid as "A bid that you set to determine the highest amount that you're willing to pay for a click on your ad."

The amount you're charged can be lower. Google Ads Help's page on actual cost-per-click says your actual cost-per-click "is the final amount you're charged for a click", and explains that "you only pay what's minimally required to clear the Ad Rank thresholds and beat the Ad Rank of the competitor immediately below you."

How the Ad Auction Works

Google Ads Help describes the auction as "The process that happens with each Google search to decide which ads will appear for that specific search and in which order those ads will show on the page (or whether or not any ads will show at all)." It sets out the steps:

"When someone searches, the Google Ads system finds all ads whose keywords match that search."
"From those ads, the system ignores any that aren't eligible, like ads that target a different country or are disapproved based on a policy violation."
"Of the remaining ads, only those with a sufficiently high Ad Rank may show."

Ad Rank isn't the bid alone. Google Ads Help's Ad Rank definition says Ad Rank scores "are calculated based on many factors, including your bid amount, the quality of your ads and landing page, the Ad Rank thresholds, the competitiveness of an auction", and adds that "even if your competition has higher bids than yours, you can still win a higher position at a lower price by using highly relevant keywords and ads."

Keywords and Negative Keywords

Google Ads Help's page on keyword matching options says: "Keywords are words or phrases that are used to match ads with the terms people are searching for." The same page says: "The keyword match types dictate how closely the keyword needs to match with the user’s search query so that the ad can be considered for the auction." Its headings name three types: broad, phrase and exact match.

Negative keywords work the other way. Google Ads Help's page on negative keywords says: "Negative keywords let you exclude search terms from your campaigns and help you focus on only the keywords that matter to your customers." A dog groomer, for example, could add jobs and course so the ad stays off searches from people looking for grooming work or training.

Quality Score Is a Diagnostic, Not a Price

Google Ads Help's page about Quality Score says: "Quality Score is a diagnostic tool meant to give you a sense of how well your ad quality compares to other advertisers." It also says: "Quality Score is not an input in the ad auction."

The same page says "Quality Score is calculated based on the combined performance of 3 components": expected clickthrough rate, ad relevance and landing page experience. Google Ads Help defines the last one as "How relevant and useful your landing page is to people who click your ad." Use the score to find which of the three to work on first, not as a target in itself.

Clickthrough Rate

Google Ads Help's CTR definition says: "CTR is the number of clicks that your ad receives divided by the number of times your ad is shown: clicks ÷ impressions = CTR." There's no single number to aim for: "Note that a good CTR is relative to what you're advertising and on which networks." Compare your own ads and keywords with each other instead.

Worked Example: One Week of Search Ads (Sample Figures)

These are sample figures for a fictional dog groomer, invented for this example.

Impressions (times the ad was shown): 2,000
Clicks: 60
Clickthrough rate: 60 ÷ 2,000 = 3%
Cost for the week: $90.00
Average cost per click: $90.00 ÷ 60 = $1.50
Booking inquiries from the ad: 6, so $90.00 ÷ 6 = $15.00 per inquiry
Bookings: 3 at $70.00 each, so 3 × $70.00 = $210.00 booked, at $90.00 ÷ 3 = $30.00 of ad spend per booking

The last two lines are the ones to watch. Clicks and clickthrough rate show whether the ad gets attention; cost per booking shows what the ads cost you for each job. Use your own figures; these are only an illustration.

Setting Up a First Campaign

Pick one service. Write down the searches a customer would type when they need it today.
Match the ad to the page. Name that service in the ad, and send clicks to a page about that service.
Add negative keywords for searches from people you can't serve.
Decide what counts as a result, such as a call, a form or a booking, and how you'll count it.
Check the search terms each week. Look at which searches triggered your ads, and add new negative keywords as you go.

Where Billed Fits

To compare what a campaign cost with what customers paid, keep a record of paid work. Billed's invoice software page says: "Invoice reports show which invoices are paid, partially paid or past due, and you can see who owes you money and send them a payment reminder."

Frequently Asked Questions

What does PPC stand for?

Pay-per-click. With cost-per-click bidding, you're charged when someone clicks your ad, and the price of each click comes from the ad auction.

Does the highest bid win the top position?

No. Google Ads Help says that "even if your competition has higher bids than yours, you can still win a higher position at a lower price by using highly relevant keywords and ads."

Does Quality Score set my cost per click?

Google Ads Help says: "Quality Score is not an input in the ad auction." It describes Quality Score as a diagnostic tool for comparing your ad quality with other advertisers.

What is a good clickthrough rate?

Google Ads Help gives no single figure: "Note that a good CTR is relative to what you're advertising and on which networks." Compare your own ads with each other over time.

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What Is PPC? A Simple Guide