At the moment, there are two large providers in the PPC arena: Google and Overture. Overture, which founded the PPC model in 1998, was bought by Yahoo! in July 2003. Google changed its own advertising system, Google Adwords, into a PPC system in 2002, instantly becoming a very prominent player in PPC due to its dominant position in the search arena.
While the concepts are very similar between the two biggest PPC providers, there are some differences between the PPC models of Overture and Google. Search engine marketers need to be aware of these differences in order to utilize the characteristics of each PPC engine effectively. The biggest difference between the two providers is the ranking criteria of the PPC ads. Overture uses a model that ranks the adverts based entirely upon the bid amount of the advertisers. Thus, the advertiser that can afford to bid the highest for any given term will achieve the top position in the PPC results.
Google Adwords, on the other hand, uses a model where two variables are taken into consideration: bid amount and click-through-rate (CTR). Click-through-rate can be calculated with the following simple formula:
Google does not provide advertisers with the exact formula and values that it uses in the ranking criteria, but a simplified formula for its bid rank would look like this:
The reasoning behind this equation lies in relevancy. Google believes that ads that are clicked more often than the other ads for that particular search phrase are more relevant to the searchers. Consequently, those ads appear higher in the search results.