One of the recent trends that have grown aggressively as an aspect of online Marketing is that of pay per click. Big network operators such as Microsoft ad centre, yahoo! Search marketing and Google ad words, have all emerged as Pay per click service providers and function as a bid based model.

The pay per click model of advertising is a model in which the advertiser is required to pay his host only when any visitor clicks the ad of the advertiser. The advertisers can chose from a variety of channels such as blogs, advertising networks and search engines to use them for their pay per click advertising model. The search engines are however the most commonly used channel for this model. In this case the advertiser usually needs to set some key words that connect with their target audience. The advertisers need to bid for these keywords with their search engines. This is also the revenue model for most of the search engines like Google.

The cost of the click can be estimated either on a bid based system or on the flat rate system. The cost is always determined in relation to the value of each click which further depends on the source from where the click has been done. It would also vary with the type of visitor that is expected to click as it is the probability of him placing an order which will ultimately determine profitability in most cases.

In a flat rate pay per click model there is an agreement of the advertiser with the host to pay him a fixed amount of money on every click that has been made. The host will charge a price according to the area of the web site that is being used. Also the time of the contract is usually inversely proportional to the cost determined. Longer the contract, lesser is the cost that advertiser has to bear per click.

In the other type of bid based pay per click model, there is a contract that is entered into wherein the advertisers compete against each other. The competitors keep bidding and offering maximum prices to the host and then the one with maximum bid is selected.