What is CPC (Cost Per Click)

What Is Cost Per Click (CPC)?

Cost per click (CPC) is an online advertising revenue model that websites use to bill advertisers based on the number of times visitors click on a display ad attached to their sites.

The primary alternative is the cost per mille (CPM) model, which charges 1,000 ad impressions—or views—of the display ad, regardless of whether or not a viewer clicks on the ad.

The cost-per-click model is also known as pay-per-click (PPC)

Cost per click (CPC) is a paid advertising term where an advertiser pays a cost to a publisher for every click on an ad. CPC is also called pay per click (PPC). CPC is used to determine costs of showing users ads on search engines, Google Display Network for AdWords, social media platforms and other publishers. CPC is a significant factor in choosing bidding strategies and conversion bidding types to maximize clicks relative to budget size and target keywords. If you're running paid advertising campaigns, there are additional ways to grow traffic to your website. Browse our services to see of there are any other web solutions you're interested in.

Understanding Cost Per Click (CPC)

Advertisers commonly use cost per click with a set daily budget for a campaign. When the advertiser's budget is reached, the ad is automatically removed from the website's rotation for the remainder of the billing period. For example, a website with a cost-per-click rate of $.10 would bill an advertiser $100 for 1,000 click-throughs.

Most publishers use a third party to match them with advertisers. The largest such entity is Google Ads, which uses a platform called Google AdSense.

What Types of Ads Are Involved In CPC?

There are a variety of text, rich-media or social media ads that use CPC as a factor in calculating total paid advertising campaign costs. Some ad types are only displayed on certain networks, such as the Google Search Network (ads at the top of Google’s search engine result pages) and Display Network (Google-owned or partnered sites like YouTube and Gmail).

CPC is a factor in ad types including:

• Text ads
• Shopping ads
• Image ads
• Video ads
• Twitter promoted tweets
• Facebook ads
• Instagram ads
• LinkedIn ads

How Much Does a Click Cost?

A click costs no more than you're willing to pay through a bidding system. For example, you could bid a maximum of $1 per click on Google Ads. The system runs through algorithms that evaluate your ads and charges you no more than your bid. However, there are some caveats.

The Google Ads system applies discounts to advertisers with higher ad Quality Scores. This score is determined by the relevance of the ad and the advertiser's content to the search terms used. You'll also be dinged in the position of your ad the lower you bid, again adjusting for the other factors evaluated by the platform

How Do I Calculate Cost Per Click (CPC)?

Cost per click is calculated by dividing the cost of a paid advertising campaign by the number of clicks. If you want to use a popular online advertising tool like Google AdWords and bid on keywords in order to display paid ads, these tools will often show CPC for target keywords. 

Cost per click = Advertising cost / number of clicks

Related metrics that involve CPC include average cost per click and maximum cost per click. Within paid advertising platforms like Google AdWords, there are certain strategies like enhanced cost per click and manual cost per click bidding that marketers may want to utilize depending on their goals.

What is average cost per click?

Average cost per click is the average an advertiser spends for every ad click.

Average CPC = total cost of clicks / total number of clicks

What is maximum cost per click?

Maximum cost per click is the highest amount you think a click is worth and the highest you want to pay. The maximum CPC set may not be the amount you actually pay for the click. Google recommends setting the maximum CPC to $1 in AdWords if you are unsure of what to choose for the highest amount per click.

What is manual cost per click bidding?

Manual CPC bidding is when advertisers set the maximum CPC for each ad by hand in contrast to automated bidding strategies.

What is enhanced cost per click?

Enhanced cost per click is an automated conversion bidding strategy in Google AdWords for certain types of ads that appear on Google’s Search Network and Display Network. Enhanced CPC is used if your goal is to maximize ad conversions.

Pros of Measuring Cost Per Click

• Meet goals to drive traffic. Attract more customers to your sites or stores by paying publishers to display ads where your target audience is likely to frequently visit.
• Measure CPC metrics to improve paid advertising campaigns. Compare the cost of paid advertising campaigns to revenue generated or other metrics by calculating CPC.
• Determine which ad types to use. If you find CPC is not paying off for certain ad types, shift your budget to ad types that generate higher revenue or traffic.
• Choose manual or automated bidding strategies. If you have a good understanding of your business, audience and paid advertising strategies for CPC, you could choose to automate your bidding strategies so you can focus on other things.

How Is Cost Per Click Calculated?

A formula may be used to determine the rate you pay per click. One of the most popular ways to calculate your CPC is:

Advertising Campaign Cost / Number of Clicks

Some publishers or platforms like Google Ads use a bidding process to set their rates. For instance, Google Ads asks you to select the maximum amount you're willing to pay per click.2 Google's platform then uses Ad Rank thresholds to determine the actual cost when your ad is clicked.3

This means your cost varies up to your maximum because the platform ranks your bid, ad quality, position, user signals, search topics, and related auctions and sets the cost per click.3 You can even have Google automate the bids for you to increase your click-through.4

The platform then positions your ad based on your maximum amount, with higher maximums achieving a higher placement on the page.2

How to Lower Cost Per Click

Because advertising can become very expensive when paying by clicks, you need to have a plan to keep from paying too much per click. This means researching and creating a strategy with keywords to raise your Quality Score, a large measure of how your ads compete with others.

Raise Your Quality Score

Your Quality Score is crucial to increasing your clicks and decreasing your costs. You can improve your Quality Score by making adjustments to your:5

• Expected clickthrough rate: You can edit the ad to make it more appealing to your targeted consumer base, highlight features and benefits, and above all, ensure your ad details match your keywords.
• Ad relevance: Your ad should appeal to your audience and their search intent. Look at search results for different phrases and analyze the results.
• Landing page experience: Landing pages should be relevant to the audience that clicks the ad. For instance, an advertisement for a widget shouldn't lead to a landing page featuring gadgets. Additionally, the speed your landing page loads should be fast enough on mobile devices and computers so that potential customers don't need to wait.

Keyword Research

Good keywords are important for driving traffic. Keywords drive internet searches, so it makes sense to ensure you have keywords in your ads that lead people to your website. Keep in mind, however, you can have TOO MANY keywords, too. So try not to overdo it. Success in digital marketing is about finding the right number of keywords to target per page or advertisement. Overall, keyword research could be an entire study of its' own! To get some ideas about targeting your customer-base, try different methods to see which works best for you. Some techniques you can try are:

• Targeting: You should try to target your audience by matching your ad text with what they are searching for.
• Splitting: You can split your ads into groups with different keywords and match them to other searches.
• Grouping: Grouping involves creating themes for your products and services, which you then make group names for and use keywords that match searches. For instance, if you are marketing headphones, you could group them into over-the-ear and in-ear headphones and target your audience with matching keywords.

Cost Per Click Alternatives

There are plenty of alternatives to Google AdSense, including Media.net, Infolinks, Amazon Advertising, and Bidvertiser, to name a few.

Some specialize in small or large publishers, and some offer a better deal than Google AdSense to stay competitive.

Amazon Advertising is designed to allow Amazon website affiliates to place ads that reach shoppers on and off the website when searching for specific products.7

Meta Ads Manager allows advertisers to run campaigns on Facebook and Instagram.8

CPC vs. CPM

In the print world, advertisers choose publications that match their customer profiles and place ads in them. They pay more for bigger ads and more prominent placement, but the effectiveness of those ads can usually only be implied by tracking before-and-after sales numbers. Coupons and contests are among the strategies that help them track their ads' effectiveness better.

In the online world, advertisers know how many people are at least interested enough to click on their ads. That has led to two of the primary ways to reach consumers through web advertising:

• Cost per mille (CPM) or cost per thousand is a pricing model that charges advertisers for the number of times their ads were displayed to a consumer.
• CPC charges advertisers only for the number of times a consumer clicks on their ads to get further information on a product.

Advantages and Disadvantages of CPC Advertising

Pros Explained

• Higher value: Cost-per-click advertising is more highly valued than CPM advertising because it indicates that an ad has gotten a prospective customer to take the first step towards taking action, whether it is making a purchase or getting more information.
• Drives website traffic: Cost per click is generally considered more effective because it drives traffic to the advertiser's site.

Cons Explained

• More expensive: CPC is more costly than CPM
• Prices vary widely: Because prices vary due to other factors, you may pay less or more depending on your Quality Score, bidding, sponsorship, and other factors.
• Less effective for brand and product awareness: CPM is better for brand recognition and product awareness, assuming that page visitors at least see the logo and, however unconsciously, absorb the message.

The Bottom Line

Demographic target advertising was created offline, primarily by the print magazine industry. It allowed advertisers to choose a specialty magazine that reached the audience that was most likely to be interested in their product.

The cost-per-click advertising model emerged with the internet. It added an actionable element in the ability to immediately click on a link to get more information, place an order, claim a coupon, or download an app. Click here to learn about eCommerce using WooCommerce.

The software for creating ads and buying ad space is growing increasingly sophisticated. However, the primary concern of advertisers in using either the cost-per-click or cost-per-impression models is accuracy in reporting the actual numbers that the ad reaches.

You typically need an experienced team running paid advertising campaigns for you. After all, you don't want to waste any ad spend spending months learning how to manage and create ads. Contact Whitewood Media to manage your paid advertising campaigns.

We'll use our expertise to get you the returns you're looking for. Whitewood Media is a digital marketing agency based in Denver, CO. We have a company full of seasoned SEO experts, Paid-Advertisers, and Web Developers who can accomplish any project you have. Click here to see all of our digital web services.