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Following are the terms commonly used in pay per click advertising networks. Familiar with these terminology not only help you manage your ads easily, but also helps to have a better picture on your ads performance.

Bid – Bid refers to the amount that advertiser is willing to pay for each click. It is the price you tell AdWords you are willing to pay for clicks on your ads.

Click (Click through) – Occurs when a user sees your ad and clicks on the title of your ad, leading them to your website.

Click Fraud – Click Fraud involves sending fraudulent clicks to PPC ads. These clicks can be generated by program automatically or made by manually. The intent of the fraud may be to raise money for the ad space, or to financially hurt the advertiser.

Conversion – The number of clicks that result in the visitor taking the desired action. These desired action may be purchasing, registration, or subscription.

Cost Per Click (CPC) – Amount that the advertisers is willing to pay per click on the advertisement.

Click Through Rate (CTR) – The number of clicks divided by the number of impressions a specific keyword or ad received.
The CTR % calculation is as follows

Number of ad clicks / number of impressions x 100

Impressions – The number of times an ad is displayed on Google or on sites or products in the Google Network.

Landing Page – A web page where customers will arrive when they click your ad.

Max Bid – The highest amount that an advertiser is willing to pay for each click.

Pay Per Click (PPC) – Advertisers only pay when their advertisement is clicked.

Quality Score – It is to measure the quality of your keyword and ad. Quality Score is calculated by click through rate of keyword, relevance of your ad text and landing page, historical keyword performance, and other factors. The higher the Quality Score, the lower the price you’ll pay per click.

Return on Investment (ROI) – The amount of money made when compared to the amount spent for a specific advertising model. It is the ratio of the cost of advertising relative to the profit generated from conversions such as sales or leads.
The ROI % calculation is as follows

(Revenue – Cost) / Cost x 100

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