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What Is CPC (Cost Per Click)?

When you start a new digital marketing campaign, you need to know how much your marketing will cost. After all, that will impact how many ads you can put out and the kind of return on investment you can expect from your marketing.

Cost per click (CPC) is one of the most common ways to measure how much you’ll pay for a digital advertisement. Today, let’s take a closer look at what cost per click means and how it works.

What Is the Definition of Cost Per Click?

Put simply, cost per click (CPC) is a type of ad bidding. It means that an advertiser (i.e., you) pays each time a visitor clicks on one of their ads, not when a visitor sees one of the ads or when one of the advertisements goes live on a target website.

CPC marketing campaigns require you to set a maximum cost per click bid. (This is also called the maximum bid CPC.)

In other words, the maximum cost per click bid is the maximum amount you wish to pay for a click on your advertisement on Google, Bing, or a social media platform like Linkedin or Facebook. This is the most money you’ll be charged for a click, although you can also be charged significantly less depending on the specifics of your marketing campaign.

Max CPC is contrasted with actual CPC, the final amount you are actually charged for an ad click. In CPC marketing campaigns, you can select between manual ad bidding (where you choose the bid amounts) or automatic ad bidding. This allows Google to set bids based on predefined parameters in order to get you as many clicks as possible for your budget that lead back to your eCommerce website.

CPC bid pricing is used with pay-per-click or PPC ads most often, though it can be used with other ad types. CPC is one of the most important metrics in online advertising, as the average cost per click can affect ad partnerships, the click-through rate (CTR) a company can expect, and ad rank on Google.

When Do You Use Cost Per Click?

Cost-per-click advertising pricing models are used when marketers only want to pay for traffic they actually get to their website, not for impressions on a target website. 

For example, if you only want to spend your marketing budget when your target consumers click through an advertisement on your website to view your products, you'll use CPC bidding when posting your ads on Google or elsewhere.

When you use CPC pricing, you set a daily budget for your ad campaign. That’s how much money you wish to spend on your ads for that day. When your advertising budget is used up (meaning that so many people clicked on your ads that you no longer have any budget left), your ads are removed from your target website’s rotation for the rest of the billing timeframe.

Say that you decide to put up some digital ads with a cost-per-click rate of $.10. You'll be billed $100 for every 1000 click-throughs or clicks you get from website visitors.

CPC advertising is primarily used with third parties who match websites with advertisers. Google Ads is by far the largest third party to perform this service, which it offers via its platform Google AdSense.

What Is the Cost of a Click? Average CPC Explained

That depends on the goals and budget limitations of your marketing campaign. A click costs as much as you are willing to pay through a given bidding system.

For instance, you could bid up to a maximum of $1 per click when posting ads on Google Ads. Once your ads are uploaded to the platform, the Google system then uses algorithms to evaluate your ads and charges you up to that $1 bidding price. That’s your maximum CPC.

If you don’t have a lot of competitors on a target site or for specific keywords, you could end up paying much less, like $.30 per ad. 

Furthermore, Google Ads gives advertisers discounts if they have high ad Quality Scores. Quality Scores are determined by things like advertiser content, ad relevance, and spelling errors in text ads.

How Do You Calculate CPC?

To understand how CPC can impact your marketing budget, you need to know how to calculate the cost per click. Fortunately, there's a basic formula for this purpose:

  • Advertising campaign cost /number of clicks = CPC

In essence, take your total advertising campaign cost and divide it by the number of clicks that you received for that advertising campaign. The number you get is the total cost you pay per click to your website (or target site).

For example, if you have a PPC advertising budget of $2000 and receive 500 clicks after that budget is spent, your cost per click is four or $4.

Depending on the skill of your marketing team, you may want to use platforms like Google Ads to set your rates automatically based on current market conditions or competitiveness. This way, you can bid for a competitive price relative to other marketers in your industry or niche.

How Can You Optimize Cost Per Click?

You can lower CPC and display ads for less by improving your ads’ Quality Scores. You can do that by:

  • Making sure your ads are relevant to your audience and search engine intents. Make sure your ads reference specific Google Adwords keywords or phrases that are related to your industry. This strategy falls under the SEO umbrella.
  • Connecting or linking ads to good landing pages that are also highly relevant and quality
  • Making your ads more appealing or interesting to your target consumers, such as by making sure that ad details match keywords or that they highlight features and benefits of your brand and avoiding use of negative keywords.

What Is the Difference Between CPC and CPM?

Cost per click is directly contrasted with cost per mille/cost per thousand (CPM).

In a nutshell, CPM is a pricing model where you are charged for every 1000 impressions of an ad. An “impression” is when a viewer is exposed to your ad or is reliably expected to have seen it.

So, if you have a CPM rate of $5, it means that you are charged $5 for every 1000 people that see a given advertisement. CPM can be advantageous for marketing campaigns where it isn't necessarily to sell products or bring people to your website but to improve brand awareness or for other purposes.

For instance, if you are in the middle of a rebrand-focused PPC campaign and just want to alert your target audience about this, sending out a batch of Facebook ads with a CPM pricing model could be the best way to accomplish your goals.

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CPC, or cost-per-click pricing, is a common way of determining how much you want to spend on digital advertisements. If you have a set marketing budget and don't want to go over it, CPC pricing could be a great way to ensure that each dollar you spend results in someone getting to your website or online store.

Combined with AdQuick, you could have a robust, comprehensive online and in-person marketing campaign up and running in no time. AdQuick helps you choose marketing budgets and pricing strategies for your billboard ads very easily, plus lets you manage your billboard ad campaigns from an intuitive dashboard. 

Try it today to learn more.


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