Pay per click advertising, which is often referred to as pay-for-placement (PFP) or paid placement, uses an advertising price structure where the “advertiser pays depending on the number of times the published ad is clicked on” (Inslink). In search engine advertising, advertisers bid amount determines the price of a click and (usually) the placement in the advertisement spots, which are generally located at the top and on the left side of the search results.
Let us take an example of pay per click advertising. Company A wants to advertise on Search Engine X, which uses a PPC price structure. Company A bids on certain keywords against other companies, B and C that want to appear for those same keywords. The ranking of the adverts depends on which one of the companies bids the highest. Let us assume that Company A bids $0,35, Company B bids $0,34 and Company C bids $0,36. Company C would appear first in the PPC listings because its bid is the highest, Company A would be second and Company B would be third. When a user clicks on the advert of Company A to take them to the website Company A, Company A would pay the amount that it bid for that keyword on Search Engine X, in this case $0,35 per click.