Pay per click is a term used to describe the form of Internet advertising characterized by ads (typically banner ads) placed on third-party websites with the goal of inducing the website user to click through to another website or web experience. The details can be simple or complex, with models operating either on a per-click rate or a flat rate.

Large sites (like Google and Yahoo!) display specific ads based on keywords and search terms, which allows PPC ads to be targeted to users who are more likely to be receptive to the products or offers being promoted in the ads. And while this, in theory, should convert a high percentage of views into customers, a recent study by Nielsen.com offers some interesting data.

Even with the targeted placement of PPC links, it turns out that only 23% of searchers click PPC links. Compare with that number the 42% of searchers who click the top-ranked natural result in the search engine. The latter result is based primarily on relevance and strong SEO.

In addition, when searchers are narrowed down to actual buyers (customers), PPC still lags behind SEO in conversion rate, as PPC links produce 25% fewer sales than are achieved through the natural search engine results. So while PPC ads are highly targeted, one can assume the average consumer treats them with more skepticism. Presuming that search results are more unbiased and merit-based, consumer confidence clearly backs search engine algorithms. All of this serves as more incentive for business owners to continue spending on SEO rather than PPC.