Pay Per Click Advertising 101

A tutorial to help you get started with PPC ads

PPC (Pay Per Click) advertising refers to online paid ads that generate clicks to a website rather than through freeorganic search. Each time an ad is clicked, the advertiser pays the publisher (the platform hosting the ad) a set amount. If you're looking to get more clicks on your affiliate links or drive traffic towards your content, a PPC campaign is an easy and reliable way to achieve it.

This article covers the ins and outs of PPC, including tips on strategy and budgeting. We’ll tackle how to set up your paid ad campaigns the right way, and talk about using best practices to ensure they’re successful.


Types of PPC ads

There are a whole host of options when it comes to PPC advertising. The following are the most common types:

Paid search marketing

Paid search marketing is the PPC model where companies buy ads on search engines. Ads are listed in the sponsored listing section of the search engine, or on a partner site. Most often, advertisers pay each time people click on their ad. Paying when an ad is displayed is another, less common option. These ads generally contain specific, targeted keywords and direct users to a landing page.

Display advertising

With display advertising, ads come in a variety of mediums. Unlike your typical paid search, banner ads rely on visual elements such as images, animations, video and audio to communicate goals and drive clicks. Display ads generally return a lower click-through rate (CTR) than search ads, but they can be a useful tool for companies looking to build brand awareness.

Social media advertising

Given the volume of people using social media platforms, sites like Facebook and Instagram are full of potential customers. With ads on these platforms, you can often target specific demographics with specific interests. This will help increase awareness of your products and services, bringing them to the attention of people most likely to be interested in them, helping you achieve a higher CTR as a result.

Retargeting PPC advertising

Retargeting, also known as remarketing, uses cookies to show people specific ads based on their online activities. You can drop an anonymous browser cookie when a visitor comes to your site, then when this visitor moves on to another site, the cookie will display your ads. Retargeting isn’t only for banner ads; it is also used for social media campaigns and other forms of digital marketing, like email.

How much do PPC ads cost?

When it comes to creating ads on these platforms, the two main pricing models are: CPC and cost per 1,000 impressions (CPM.) In the latter’s case, an “impression” refers to each time your ad displays on someone's screen. Therefore, you pay a set fee per 1,000 potential impressions.

Both modes are effective in getting ads out to a mass audience. Whether you should bid on a CPM or CPC basis ultimately comes down to personal preference. Since CPM focuses on expanding page reach rather than clicks, this model is best when your intent is to raise brand awareness over conversions. Most people tend to go down the CPC route.

Using PPC ads for affiliate marketing

Affiliate marketers commonly use PPC ads to promote their products and services. Mostly, they place ads on:

  • search engines

  • price comparison websites

  • targeted content sites

Since affiliate marketing is based around cost per action (CPA) – when someone clicks on an ad and completes an action, such as buying something or providing an email address, for example – payment is closely aligned with results. This type of marketing requires ongoing management to get the best results. Factors that can negatively impact this kind of PPC marketing include poor ad response, poor placement, and competitive keyword bidding for brand terms.

How does Pay Per Click advertising work?

As we’ve established, advertisers use PPC to promote their products or services. They pay the PPC networks (Facebook, Bing, Google Ads, etc.) to display their ads, and are charged when a visitor clicks on or sees their ad.

The whole process plays out as follows:

  1. As an advertiser, you join a platform’s PPC program and “load” your account with some money.

  2. Create an ad that fits the platform. This might be a small text ad, or could be an image or video.

  3. Specify the keywords your ad should be associated with.

  4. Specify how much you’re willing to pay each time someone clicks on your ad.

  5. When someone types one of the keywords or keyword phrases into a social platform or search engine and clicks the “search” button, matching ads are displayed on the results page.

  6. If the searcher clicks the ad, they are taken to the advertiser’s website, and you as the advertiser are charged for the click.

What is a PPC campaign?

A PPC campaign can be defined as a logical, organized approach to PPC advertising, with comprehensive keyword research and ongoing management and maintenance. When broken down, all successful paid search campaigns share the same five elements:

  • Comprehensive planning

    The planning process for your paid marketing effort will encompass everything from budgets to timeframes and the list below.

  • Ad groups

    One or more ads which target a shared set of keywords. Once you set a bid, an ad group keywords trigger an ad to appear.

  • Keywords

    Determine which keywords are relevant to your business’s offerings, and bid to place ads in the search results for relevant search queries.

  • Ad text

    The text and/or imagery that convinces users to click on your ad.

  • Landing pages

    Where people are directed to when they click on your PPC ad.

What do I need to set up a paid search campaign?

It doesn’t take much to get started mapping out your first PPC campaign, but the following four things are essential:

Set clearly defined goals

PPC, like any other marketing effort, requires establishing business goals before anything else. With PPC, these goals are particularly important because they guide the structure of your campaigns. For example, you could structure your campaigns by user intent, or by how far users are in your marketing funnel, and so on.

Your first task is to decide on what you want to achieve with your paid search effort. Is it to build awareness and consideration among prospects? Generate leads? Sell products? Increase average order value? Upsell existing customers? Increase loyalty? Drive app installs or in-app actions? Whatever your goals are, map them out and refer back to them often.

Ensure you have an adequate budget

While it might seem obvious, PPC advertising requires you to spend money to make money. Without an adequate budget, your ads won’t display very often.

Create effective landing pages

When someone clicks on your ad, you need a place to send them to. Each time users click on an ad, they should be sent to a dedicated landing page with specific goals and instructions (making a purchase, email capture, etc), rather than just your website’s homepage. It doesn’t matter how good your ads are if you don’t have useful landing pages.

Make sure you have sufficient resources

The complexity of your campaign and the size of your budget will dictate how much time you need to dedicate to managing, analyzing and optimizing it. Contrary to popular opinion, PPC requires work and it’s an incredibly easy way to waste money. Devoting the right amount of resources, whether that’s you personally, or by employing talent will be fruitful in the long-run.

How effective is PPC advertising?

The success of a PPC campaign comes down to four key components: keywords; ad copy; the landing page; and the PPC manager (you).

You

Once you’ve got a handle on creating ads on your platform and your paid search campaign is up and running, it’s time to take charge of the tasks required to run a successful program. Keeping on top of your performance and reporting is a no-brainer as a best practice. Most search marketers perform a daily check to make sure nothing has negatively affected their account, such as budget running out or KPIs spiking or dipping too much.

Handle optimizations and testing in a similar way. Check daily to tweak certain bids, especially for terms that constitute a large portion of your budget. Shaving a few cents off a bid could achieve the same performance and save you some extra cents to reinvest in another campaign.

Here are some other areas you should focus on:

  • Niche terms

    With PPC it’s possible to target niche markets in highly competitive industries. If you can discover the topics, keywords, products, and services with high demand and low competition, you’ll benefit from the most affordable CPC rate.

  • Product listings

    Many shopping campaigns run on PPC platforms. Users search for a specific product and are presented clickable images of exact matches at the top of their search results. If someone clicks on your product listing, they are directed to your site’s product page to close the sale.

  • Short-term campaigns

    Quick PPC wins include increasing sales and revenue and site visitors. You can see the results very quickly compared to other forms of advertising, and can easily tweak elements to get better results. It’s common to continually A/B test landing pages and their ad copy, for example (which we’ll talk more about later).

How PPC Auctions work

With PPC, you pay each time someone clicks on your ad. The price is determined by the market value of the keywords or expressions you’re interested in targeting. The vast majority of CPC/PPC marketplaces operate on an auction bidding model where advertisers bid on these keywords. Favorable ad placement isn’t always necessarily determined by how high your bid is, but how relevant and valuable it is to users.

When someone conducts a search online, the platform they are using will find all the ads with matching keywords. From those ads, it will discard any that aren’t eligible (those that target a different location, for example). Of the remaining ads, only those with a high ad rank may show.

What is PPC ad rank?

“Ad rank” refers to the position of a PPC ad on a search engine results page (SERP). The key components of a higher ad ranking are relevant keywords, landing pages, and ad text.

Your ad rank determines whether your PPC ads will appear in SERPS, and where it will appear in the SERP. Having a high ad rank is important because it will result in greater exposure and a higher CTR for your ads.

What is the quality score?

Quality score is a measure of how relevant a keyword is to the auctions in which it participates. This metric is used to help show the most relevant ads to users when a search happens. The quality score plays a big role in determining the positions of your ads in search results. Most PPC platforms use your quality score to influence your ad rank and the price you pay per click.

Each platform has a different way of determining the quality score. Irrespective of the PPC platform, the components that make up quality score are pretty similar. All factor in expected CTR – the likelihood someone will click on your ad; ad relevance – whether the ad copy relates to what the user is searching for; and the landing page experience – if your landing pages reflect the web query that bought someone there.

Choosing a PPC network

There are several platforms on which you can place PPC ads. The most popular options include Google Ads, Bing Ads, Facebook, and YouTube. Here’s a bit of information about each to help you determine which platform best suits your needs.

Google Ads

It’s no secret that Google handles the majority of the Web’s search queries. As such, they are the authority on generating traffic through paid ads. It might seem that using their advertising platform, Google Ads, is a no-brainer, no matter what niche you’re in, but that’s not entirely the case.

For starters, Google Ads is great for increasing visibility, but there’s also a substantial amount of competition because everyone is fighting for a higher ranking position on the search engine’s platform.

To see a profit from Google Ads, you need to take on the competition with a strategy in place and a solid idea of what your budget limitations are. That said, Google Ads is a fantastic platform for gaining visibility and targeting customers for websites promoting less-common products.

It doesn’t take much to master Google’s PPC tools. They are designed to give marketers a tight reign over their advertising spends. With Google Ads, in a few clicks, you can adjust your campaign, spending more if it’s working particularly well, or cutting back when you want to spend less.

How does Google Ads Work

Advertisers use Google Ads to target people searching Google for solutions. How do you deliver the right message to the right person at the right time?

There are variables you can fine tune in Google Ads, starting with keywords. You can set up many types of qualifiers based on geography; very helpful if you have a limited shipping area.

Let’s say you run a Men’s Suit Tailors in lower Manhattan and want to reach potential customers in your locale. You can limit your ad to appear to neighboring Zip Codes 10002, 10003,10004, 10005, 10006, 10007, 10009, 10038, 10280 and so on. You can even run your ad at certain times of the day and play around with different ad types or messages to see which converts best.

Bing PPC

Google Ads is probably the first port of call for most starting out in PPC advertising, but don’t overlook Bing Ads. Bing Ads is Microsoft's answer to Google Ads. It performs the same primary task: to run ads on its Bing search network and its partner networks (AOL and Yahoo).

Bing is no small presence in the digital world, with 6 billion searches each month. Around 30% of online searches happen on Bing. With just one Bing ad buy, you can reach 160 million unique searchers across the Bing network.

Bing offers some surprising advantages. While it can’t compete with the impossibly huge amount of traffic that Google gets, it’s an option when you don’t want to compete in the high stakes Googleverse.

Why use Bing to advertise

The main benefit of the Bing Ads PPC platform is that it’s less competitive than Google Ads. The typical cost per click on Bing costs 33-42% less than it does on Google Ads. That’s a lot. Additionally, it offers better targeting options. With Bing, you have more ‘geo-control’, so you can get even more specific about who is being targeted to see your ad.

Search volume is the biggest difference between Bing and Google. Otherwise, the platforms are both so similar that if you are already using Google Ads, you might as well use Bing. While Google Ads will bring in the bulk of your traffic, Bing Ads will help you reach a broader audience without spending through the nose.

How Bing Ads work

Bing compares bids on its platform and ad quality to competing advertisers to decide how to order ads in its SERPs. Ads are displayed at the top and the side of its SERPS.

As previously mentioned, the mechanics of advertising on Bing are virtually identical to Google Ads. Even if you’re new to paid search, Bing Ads is still easy to set up and use. In fact, the platforms are so similar, you can sync your Google Google Ads campaigns directly over to Bing.

For more information on getting started with Bing ads, refer to the official Bing Ads help site. Microsoft provides a comprehensive resource with real-world examples and “how-to” articles and videos for getting started, as well as guides to features that boost campaign performance.

Facebook PPC

As far as advertising on social media is concerned, Facebook is where it’s at. Facebook is more than a social media network for keeping up with your old friends. It’s evolved into one of the most powerful platforms for advertising, with 2.32 billion monthly active users (as of December 31, 2018). Its dominance in social media makes it an excellent tool for promotion through paid ads.

Unlike paid search advertising, with paid social networking ads you have the opportunity to get more specific with your targeting. With Facebook, you can target the demographics that are likely to be interested in your products or services. You can use the site’s tools to narrow your audience based on criteria like language, age, gender, geographic location, and more.

How the Facebook ad auction works

Facebook’s ad delivery system works on an auction structure. It runs automatically to determine which ads will be seen in a user’s feed. Facebook ads serve two goals: creating value for advertisers and providing positive and relevant experience for end users

The system is not based on a traditional auction system works on a “highest bid wins”, but what ads are the most valuable. Facebook determines an ad’s total value based on three factors: your bid, the estimated action rate, and the ad’s overall quality and relevance.

Bidding

You have two bidding methods: lowest cost and target cost. Lowest cost is an automated bid where Facebook bids on your behalf to achieve your desired result. Alternatively, the target cost tells Facebook to achieve a goal, This approach is more manual. Find out more with this in-depth guide to facebook how bidding works at Smartly.

Estimated action rate

This is the likelihood of someone taking action through your ad. The ad itself and the post-click experience are important factors. Facebook’s “estimates” are based on historical ad performance and the previous actions of the demographic you are attempting to advertise to.

Ad quality and relevance

Is your ad going to be interesting to the people seeing it? Facebook looks at user feedback to determine this. Poor feedback will decrease the overall value.

YouTube PPC

Online video streaming is HUGE. With YouTube ads, a pop-up appears before people watch a video. To set them up, head to the general settings set your desired budget for the day and it’s as simple as that. You don’t pay anything unless someone watches your ad the entire way through.

Why YouTube?

  • Traffic

    According to a survey by Tubular insights, in 2019, 80% of traffic on the Internet will come through video. That’s a hefty amount of traffic to miss out on if you don’t consider video for your PPC strategy.

  • Reach

    There are one billion users on the platform; there is potential to reach a huge number of highly engaged people

  • Targeting

    YouTube, being part of the Google empire, has a wealth of user data that only Facebook can rival. Data regarding individual preferences and interests can help you target the right people.

  • Data

    YouTube provides in-depth reports on the performance of your campaigns.

  • High conversion rates

    People tend to respond well to YouTube ad; the average conversion rate on YouTube is 14%. You might be surprised to hear that with Facebook it’s just 10%.

The cost of creating PPC ads for YouTube

YouTube video ads are relatively cheap on a CPC basis. The typical spend for a YouTube ad is between $0.01 and $0.23. Naturally, cheaper traffic that converts well sounds great, but there are some downsides to placing YouTube ads. The main one being that it takes a lot longer to create a quality video ad that converts. It can also be expensive.

The cost of making video ads can be off-putting to marketers and small businesses alike. Unless you have the capital to invest, you might not see the type of revenue you’d expect in return from search and social media advertising.

How to Budget your PPC ads

Unless you’re Amazon or Apple, chances are you don’t have an unlimited budget. Even if your niche is wildly profitable, all businesses have cash flow constraints. With PPC, you will want to allocate the right amount of your budget to each campaign.

One of the key things to understand about budgeting is that limiting budget isn’t the best way of going about things. It’s controlling spending. The starting point in determining your budget is figuring out how valuable a lead, sale, or email address is to your business.

Value your goals

When we talk about goals, we mean what do you want to do? Let’s assume we run a home furnishing store and you want to increase profits. Our average profit when an order comes in is $100. We also experience one sale for every 10 visitors to our site. If we set a maximum CPC bid of $10, then our ad spend would equal our profit, or simply break even. For our business to be profitable, our CPC bid must be less than $10.

Alternatively, let’s say your goal is to increase sales. We want to see 10 more per week or 40 extra sales per month. Since we know that one in ten clicks results in a completed sale and our profit is $100 per sale, we will set our CPC at $7.50. So, to get 10 extra sales per week, we will need $100 per week or $400 per day budget.

Daily budget

With PPC budgets it’s common to set a daily spend level. This is an average amount, not a maximum. It’s possible that you experience days when your daily budget isn’t met, and other times when you’ve overspent the daily budget. Most PPC platforms balance your budget out over a month period. With this system, you won’t spend more than the daily budget multiplied by the average number of days in a month. This way, your campaign will take into account any spikes and lulls in daily search activity.

Shared budget

There is also a Shared Budget option available in both Google Ads and Bing Ads. Available from the Shared Library, Shared Budgets allow you to allocate one budget across multiple campaigns. The search engines will automatically adjust how the budget is allocated. If one campaign underspends, the leftover daily budget can be used by other campaigns.

Choosing the right keywords for your PPC campaign

The first step to launching a PPC campaign is deciphering what your customers want and how they are searching for it. Begin by looking at your landing page to decide what your main keywords are. Then, it’s time to work out the search terms your visitors might use. Keyword Planner and Google Trends are excellent resources for this.

Your keywords will be related to your products or services, but what if your customers aren’t finding your products using the keywords you target? Your entire campaign will be a bust.

Keywords are central to any PPC campaign so it’s worth taking the time to get this right.

Keywords vs Search queries

Before we start, let’s define the difference between keywords and search queries.

Keyword – the term you are targeting

The exact term you are targeting in paid and organic search. For example, if you want to win a PPC bid for Electric Kettle, then Electric Kettle is your keyword. These are the words SEOs, affiliate marketers and the like come up with to define their strategy. End users don’t know about them (or care).

Search query – what users type

This is the actual word or string of words that someone types into a search engine. If they are looking for an electric kettle from Bosch it could be something along the lines of ‘Electric Bosch Kettle Black 2ltr’, or ‘Bosch Electric Kettle Sale’.

Take a look at the diagram below. There’s a pretty significant difference between queries and keywords:

Grouping keywords

Grouping and organizing your keywords improves your PPC strategies by enabling you to create:

  • Relevant text ads

  • More effective landing pages that drive conversions

  • Ad groups that improve your quality score

The first step is to whittle down a sea of keywords into a few main groups. If you’ve done proper keyword research, you’ve likely got quite a few to play with.

Begin by creating groups of keywords that drive the most traffic and conversions. These will form the basis of your top-level keyword groups. They should be broad; the idea is to build up a taxonomy, or hierarchy. After these are established, you’ll branch out general groups into more specific subgroups.

Create top-level keyword groups

Top-level keywords will be determined by your business offering. For example, say you own an online clothing shop with a sizeable shoe section. Let’s say your best performing organic keyword is “sports shoes”. Notice the overlap between these keywords. You need to determine which term is more characteristic of what you are selling: sports or shoes?

The answer here is shoes. There can be a huge number of search queries related to the word sports, but they won’t be relevant to your business. In this case, shoes will be a strong top-level keyword group.

When you create your first group of keywords, more promising top-level groups will become apparent. There are broad categories of shoes that are a safe bet, such as sneakers and sandals.

Create smaller, more specific subgroups of keywords.

Now that your top-level groups are decided, it’s time to segment them down into smaller, more targeted subgroups. This tier usually contains a modifier, such as a brand name, or any other salient detail. A second-level group for the “shoes” keyword might include occasions and styles. For example, “running shoes” or “wedding shoes”. These modifiers tell you what kind of shoe it is. The figure below shows a keyword group tree for shoes.

You might start off with simple account structure like this

then an extended version that looks something like this

Notice, in the last example, the keywords are more precise. This is where you use broadly matching keywords to capture long tail queries. For the most search engine-friendly PPC campaign, create further subgroups. Your ad groups, ads, and landing pages will be the most effective when targeting a whole host of different queries.

Keyword intent

Another subgroup of keywords to factor in are those which reveal the intent of potential visitors. Think about the way you search when you are thinking of making a purchase. What kind of words do you use?

In marketing speak, we categorize the deepest levels of intent with orientational terms. These are terms that help us understand how interested our searcher is in an offering. Orientational terms include transactional, investigative, and instructional words or phrases.

Refer to the following as a guide:

Orientation Examples Action/ Goal
Transactional Buy; purchase; discount, cheapest; where to buy; coupon; subscribe; for sale, sale Make purchase
Investigative Why; review; compare Inform purchase
Instructional How to, tutorial Find resource

As we’ve illustrated, segmenting your keywords is the basis of a successful and cost-effective PPC campaign from end to end. Identifying groups of keywords that are relevant to your business allows you to create a strong structure for your PPC campaign from day one.

How to Optimize your PPC performance

Once your PPC campaign is set up, it’s important to consistently measure your performance. By continually assessing your keywords and adapting your tactics, you will learn how best to optimize campaigns for maximizing return on investment.

To optimize your paid ads, factor in the following:

Making your landing pages the best they can be

To maximize your conversion rate (whether that be the number of people who make a purchase or sign up to your mailing list, etc) make sure your landing pages are well-designed and closely aligned to the ad. This will also keep your CPC down search engines reward the most relevant ad.

Tracking conversions

Not tracking conversions is akin to driving in the dark without headlights. How else are you going to determine the success of your digital advertising programs? Fortunately, with PPC, conversion tracking is simple and logical. Work out which keywords are driving sales at low costs and optimize around them.

Re-analyzing your keywords

Are yours delivering the right kind of traffic? The bounce rate is an indicator of how relevant your keywords are. Checking your quality score will give you clues as to whether your ad and landing page are as relevant as they should be. If your quality score is low, it will impact on clicks and CPC.

Monitoring and adjusting your ads

Prepare your ads so that each ad group can link to several ad copy versions. Test which is working best and shelve the ones that aren’t performing. You can also look into A/B testing, which is when you change single elements of your ads and analyze which version gets the best responses. The headline, copy, or call-to-action are good places to start. A/B, or split testing, is another topic in itself, see our guide to measuring your online marketing for advice on how to A/B test your ads.

Monitoring and adjusting your budget

Is your campaign delivering on your marketing goals? Have you achieved what you wanted with your paid ads spend? An important part of PPC is being strategic about your budget, and that means keeping on top of it. Many people participating in PPC monitor their budgets daily.

If you’ve just launched your PPC campaign, you will need to wait until you have some results before tweaking your spending strategy. Since 30 is the magic number in statistics, wait until you have 30 results. Find out which campaigns are performing the best, and which perform the worst. Adjust bids and reallocate your budget to your best-performing targets daily.

Seeking guidance

Every major search engine offers extra tools and support to help manage your campaigns. Familiarize yourself with their advice and stick to it. Google Ads Help Center is exhaustive and you can also post a question to the community to get answers from the experts. Similarly, YouTube offers a bunch of helpful content to help you create a compelling video ad, even with just a smartphone. You can also talk directly with a video ad expert when you spend $10 on the platform per day.

Applying caution

The main drawback of PPC is the potential for inflated costs, especially when advertising on Google, where competition is high. Ego-based bidding can blind people into losing sight of their budget, and in the worse case, paying more per click than the break-even cost. Let’s say your Google Ad receives 100 clicks per month, and each click costs you $0.18. Your total cost for these clicks is $18.00. Let’s assume you make $6 for each item you sell; you need to have three clicks to convert to a sale to break even.

PPC and marketing: a short-term strategy

Thinking long term, PPC shouldn’t be the be-all and end-all for marketers. Even if your PPC campaign provides you with a quick bump in traffic, as soon as you stop bidding on keywords and your campaign ends, your traffic is likely to dip back down.

With this in mind, you should utilize PPC in tandem with other marketing strategies. For example, you can turn your PPC ads on and off depending on how well your other methods are performing, or rely on PPC while your SEO strategy is taking off.

As it can take some time to build organic traffic from SEO, paid ads can provide more immediate results, making PPC a great supplement to your SEO efforts. Recent studies suggest PPC brings in more qualified traffic. Visitors guided by an ad are 50% more likely to purchase something on a website they visit than people who find the same site via an organic search.

Integrating PPC campaigns with SEO

Handle PPC with quantifiable short-term goals, unlike SEO, which is your long-term, PR-based strategy. With organic search, the effective cost per click goes down as you get more traffic. Instead of relying solely on PPC (a more expensive option long term), the optimal strategy for PPC is to use paid ads to supplement your organic efforts.

Effective PPC campaigns include elements of both to boost a site’s visibility in search engine rankings to ensure you are taking advantage of the way they work. Have you submitted your site so that it is indexed, for example? Is your content designed with SEO in mind? Is it easy to navigate? Have you made efforts to increase the quality and quantity of links pointing to your site? There are myriad things you can do to gain favor in organic search which will help your paid efforts.


Roundup

The reason that so many online marketers use PPC advertising is fairly simple: it’s a flexible tool that can be used to target relevant audiences at the right time. As long as you have a clearly defined goal and strategy, take the time to budget wisely, choose the right keywords, write good copy and create effective landing pages, you can increase traffic, compete online, and use paid search to grow profits.

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