Definition And Importance Of Cost Per Click (CPC)

Learn the Definition And Importance Of Cost Per Click (CPC), what makes a good CPC, and ad platforms using it. CPC is a common term that is used in paid advertising. It can either be called CPC (Cost Per Click) or sometimes referred to as “pay per click.”

Definition And Importance Of Cost Per Click (CPC)
Definition And Importance Of Cost Per Click (CPC)

What Is Cost Per Click?

It can be defined as a bidding model that determine the cost that advertisers pay for their ads. Here is a technical definition of CPC according to Google:

“Cost-per-click (CPC) bidding means that you pay for each click on your ads.”

How To Calculate Cost Per Click? – CPC Formula

To get the cost of CPC, you are to divide the total ad cost by the number of clicks received.

For example, if your ad campaign spent $500 in a day, and you received 100 clicks from the campaign, then your calculated CPC would be $5.00. Which is 500/100.

CPC Bidding

This allows advertisers to set a maximum cost-per-click from a campaign bidding strategy level or down to the individual keyword level.

However, setting a maximum CPC doesn’t mean paying for the campaign each time. You will be issued a final amount charge. This final amount charged for a click is called your actual CPC. In every ad auction, you are only required to pay the minimum required amount to beat the competitor’s Ad Rank that is below you.

Importance Of Cost Per Click

CPC is important in many ways. This metric helps you to understand:

  • Your relative ad strength.
  • Competitive insights on how your average CPC compares to that of others.
  • Plan and forecast your estimated traffic based on your preferred budget.
  • Relative return on ad spend (ROAS) based on your preferred budget and CPC.

For ROAS, understanding your CPC can help to guide more accurate forecast. Meaning if you have a high cost per click (CPC) but a low daily budget, then the clicks on your website must work harder to achieve your targeted ROAS.

To get this, the website or app user experience is required to be totally optimized to encourage as many sales as possible.

CPC is also important as it helps you understand how competitive you are in keyword auctions. If your ads are receiving a low CTR (click-through rate) consistently, then a big reason could be that the maximum CPC is less than that of your competitors.

CPC is also a factor that determines your ad strength and ad rank. It is a good indicator of your website present competition and future performance.

What Is A Good CPC?

The answer to this question is that it depends. A lot of factors contribute to understanding what a good CPC could be. Factors that determine what an ideal cost per click should be include:

  • Ad rank.
  • Brand vs. Non-Brand keywords.
  • Device type.
  • Keyword match type.

Different industries have noticed to have vastly different CPCs. From an early 2022 research and study, Attorneys and Legal Services boasted the highest average CPC of about $8.67.

CPC And CPM

Other than CPC bidding, CPM bidding is yet another important term in advertising. CPM bidding is a model where advertisers pay per 1,000 impressions on ads.

  • CPC: Pay per click.
  • CPM: Pay per thousand impressions.

CPM bidding differs as it focuses on view and impressions. When choosing a , the advertiser is focusing on ad reach than traffic. CPM bids are usually lower than most CPCs as they are mainly used in Display network or for wide reach on social platforms. So, if your main goal of running a campaign is awareness, then CPM bidding would be a good choice.

Ad Platforms That Use CPC Bidding

Almost every known ad platform like Google Ads and Microsoft Ads uses cost-per-click bidding. While CPC bidding is on these ads’ platform, they offer an automated bidding strategy that encompass a maximum CPC bid.

This automated bidding strategy helps to eliminate busy work out of managing each keyword bids. Bidding strategies like Maximize Clicks or Enhanced CPC lets users to set a maximum CPC. And allowing the ad platform to use its algorithm lets you increase or decrease bids automatically depending on the individual likelihood to click or convert.

Some social media ad platforms that allow CPC bidding include:

  • DSPs.
  • Facebook.
  • LinkedIn.
  • Pinterest.
  • Snapchat.
  • TikTok.
  • Twitter.

Whatever ad platform you decide to try out, CPC bidding is usually available.

Source: GOOGLE.

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2 Comments

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