Cost per click, or CPC for short, refers to a pricing model (paid advertising or pay-per-click) whereby you pay each time someone clicks on your ad. The total cost of CPC refers to the exact amount you pay each time someone clicks on your ad. This figure gets calculated each time the PPC auction occurs.
Cost-Per-Click helps website owners and marketers by directing traffic to their site.
There are many critical digital marketing metrics, and cost per click happens to be among the most important. It gives you insight into just how much your company has to pay for a lead to click your ad.
*CPC formula: CPC = ad cost/number of clicks
How Does CPC Advertising Work?
When it comes to CPC advertising, there are two primary methods:
There is the cost-per-click based on bidding, and there’s the fixed price per click model. In the case of a fixed-rate model, the publisher and the advertiser negotiate and agree on a fixed price for each click beforehand.
Interestingly, the most common form of the PPC model is the price per click based on the bid. This model requires that the advertiser set the maximum price for a click that he can afford. If you offer a high bid, and if your landing page has a quality score, the higher chance your ads will get to your desired audience.
Be mindful that the average CPC varies and depends on the industry, the type of business, and the competition. For instance, companies that promote products in insurance, law, or financial services pay more due to the competition in these industries.
Every time an ad gets displayed, the system begins an internal auction and shows ads that have sufficiently higher bids while also passing quality control.
Moreover, your ad gets displayed every time a user enters a keyword that is aligned with the words on your predefined keyword list. The advertiser pays only when a user clicks on the ad, and not just because the ad is up.
You may be a person who prefers to use a banner CPC ad. If you choose to do so, the principles remain the same. Your ad is displayed somewhere; however, you only have to pay when the user clicks on your ad. This is an effective way for companies to evaluate a customer’s reaction to their advertising campaigns and to manage their advertising budget more effectively.
There are multiple factors that affect the cost of your ads. The CPM advertising, or Cost-Per-Mille, represents the cost per thousand impressions. It tells you how much it’ll cost you to have your ad published one thousand times on any website.
You can calculate the CPM package by multiplying the total number of ad impressions by the total cost of your campaign and then you divide that number by a thousand.
The CPA, or Cost-Per-Acquisition, is the process by which advertisers can opt to pay their campaign and the amount they choose to use for conversions rather than clicks.
The CTR, Click-Through-Rate, is essential to analyze because it tells you how effective your ads are when it comes to reaching your target audience. You calculate the CTR when you divide the amount of users that clicked your ad by the times your ad got delivered.
So, the CPA, CPM, and CPC factors all dictate how much you’ll pay for online advertising, but the clicks are how you get conversions on your website.
CTR is calculated by dividing the number of users who clicked on the ad by the number of times the ad was delivered.
How to Calculate CPC Across Various Platforms
The price for a single click will vary based on the network and the factors that are particular to the platform in question.
The average amount per click for an ad through the Google Search Network is $1-$2. The average cost is even less than a dollar if you operate through the Google Display Network.
Google Adsense uses the components below to calculate your average cost:
Quality Score refers to the way that Google AdWords rates your ad. This score is contingent on your landing page quality, keyword relevancy, and your CTR. To improve your Quality Score, you have to choose relevant keywords and put them together with an effective landing page.
Your ad rank impacts your CPC. The ad rank is a figure that assigns your ad ranking when compared to other ads. This figure considers your bid amount, auction-time, ad quality, and search context amongst other items.
The maximum bid is the first factor that impacts the price that you have to pay for CPC advertising.
This maximum bid is the greatest amount of money that you’re willing to pay each time a person clicks on your ad. However, your actual CPC may be smaller than your maximum bid. You set the limit with the maximum bid to signify how much you’re willing to pay to procure leads.
The CPC calculation functions differently for social media platforms than it does for search engines. Each platform charges a different rate for advertising campaigns.
Social Media networks such as Facebook use these factors as a CPC calculator:
When running a social media ad, you must specifically outline how much you can afford to pay for a particular action. An example is an action such as clicks, conversions, or views. Moreover, you set how much you pay every time someone produces the desired action.
Be mindful that other businesses are also in competition for ad placement. Therefore your bid can determine whether you’re successful.
A great feature of social media is that you can target a specific audience. You can place your ads directly in front of the people that have the most interest in your products or services. Your ads will be relevant, and therefore, they’ll blend seamlessly into their news feed.
The ad appears as a regular Instagram photo or tweet, encouraging leads to click them since they seem similar to other posts that they enjoy.
Before you start your pay per click campaigns, the cost per click formula will tell you how much you can expect to pay for those ads. If you make sure that they are relevant, you’ll benefit since the sites want to provide an enjoyable experience to users.
Placing Your Ad
An ad will have a different average cost per click depending on where you choose to place it. That could select a mobile app, news feed, or even the sidebar.
If numerous companies compete to display their ads at the same time, it will be a factor for your cost per click.
If several businesses compete to reach the same group, it makes your cost per click more expensive due to the high demand and the limited amount of slots.
Increase CPC Efficiency
This recap of strategies will help to make your PPC campaign account more cost effective, thus lowering your cost per click.
1. Ensure that you’re creating relevant ads and switch over to manual bidding. That will allow you to prioritize the keywords that perform best.
2. Try segmented lists and remarketing. Focus on the users that have already engaged with your ads before. Through remarketing, you might be able to convince them to purchase since they are already interested in your product or service.
3. To cover all your tracks, adjust your bids to match devices, location, and time frames. Every advertiser tries to lower the cost per click and raise the number of users that look at, click, and visit their landing page. The best strategy is actually to track everything at once and identify what works best and focus on that component.
A CPC calculator can inform you of what you can expect to pay for your PPC campaign. There may be a different CPC formula from one platform to the next, so it’s important to view the components that affect the cost you end up paying. This factor is particularly useful when you make the advertising budget.
Remember that if you aren’t meeting the criteria or taking the steps to make your cost per click (CPC) lower, it can harm your advertising investment revenue. Being aware of the CPC formula and following these simple strategies can help you develop a more efficient campaign.