Cost Per Click (CPC)

When an advertiser looks into the costs of a digital advertising campaign, one of the most popular pricing models is cost per click. It is especially used in paid search and display campaigns. This model allows advertisers to pay only when a user clicks on their ad. Read on this glossary page to learn what is CPC, and how to use it to optimize bids and budgets. 

What is the Cost Per Click? 

Cost per click (CPC) is the actual price paid by an advertiser for each click their ad receives. Advertisers and marketers look at CPC to determine if the campaign is cost-effective. It is commonly used in pay-per-click (PPC) campaigns across platforms like Google Ads, Bing Ads, and social media. 

How does CPC work?

Typically, CPC models are used in an auction framework, where advertisers bid for the keywords or ad placements they want for their ad units. The final cost per click is set by the competition among advertisers. In this case, the higher the competition, the higher the cost per click. 

Why is Cost per Click Important?

CPC helps advertisers gauge the efficiency of their ad spending. A lower CPC allows for more clicks within the same budget, increasing the potential for conversions. It also impacts other key performance metrics like cost per acquisition (CPA) and return on ad spend (ROAS). 

How to Calculate Cost Per Click

The formula to calculate CPC is:
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For example, if you spend $200 and receive 400 clicks, your CPC is $0.50. 

What is a Good CPC?

A “good” CPC varies by industry, platform, and campaign goal. A competitive CPC in one industry may be expensive in another. The key is to compare CPC with the value of each conversion. 

Different bidding strategies influence CPC: 

Maximum cost per click is the highest amount you’re willing to pay for a click; doing this allows control over how much you spend per interaction. 

Manual CPC bidding gives advertisers full control over their bids. You decide the max CPC for each keyword or ad group, allowing marketers to manage the budget at a granular level. 

Enhanced cost per click (ECPC) is a semi-automated bidding strategy that adjusts manual bidding based on the likelihood of conversions. 

How to Lower CPC?

A lower CPC can stretch your advertising budget. There are some steps you can take to get the lowest possible cost per click for your next campaign. 

Controlling the traffic: Invalid traffic can contribute to irrelevant and invalid clicks, which cost you not only in the cost of the click, but also in lost business. 

Optimize ads for location and season: Contextual targeting, for example, can lower CPC costs by only showing the ads at optimal times and locations. 

Optimize for devices: Showing ads on devices that are not where your audience is is a recipe for lost money. Use dynamic optimization to ensure the right ad version reaches the right device for your target audience. 

Optimize metrics to get a better quality score: Since a higher quality score lowers the cost per click, optimizing it can help the campaign. The Quality score measures several metrics, including CTR, impressions and click rates, and the relevance of the ad copy.