Cost Per Click (CPC)

What is cost per click (CPC)?

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

The main alternative is the cost per thousand (CPM), which charges for 1,000 ad impressions (or views) of the display ad, whether or not someone clicks on the ad.

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

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 website rotation for the remainder of the billing period. For example, a website with a cost-per-click rate of $0.10 would charge an advertiser $100 for 1,000 clicks.

Most publishers use a third party to connect them with advertisers. The largest such entity is Google Adswhich uses a platform called Google AdSense.

How much does a click cost?

A click does not cost more than what you are willing to pay through an auction system. For example, you can bid a maximum of $1 per click on Google Ads. The system uses algorithms that evaluate your ads and do not charge you more than your bid. However, there are a few caveats.

The Google Ads system applies discounts to advertisers with high Ad Quality Scores. This score is determined by the relevance of the advertiser’s ad and content to the search terms used. You will also be affected by your ad position as you bid, again adjusting other factors assessed by the platform.

How is cost per click calculated?

A formula can 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 an auction process to set their prices. For example, Google Ads asks you to select the maximum amount you’re willing to pay per click. Google‘s platform then uses Ad Rank Thresholds to determine the actual cost when your ad is clicked.

This means that your cost varies up to your maximum as the platform ranks your bid, ad quality, position, user signals, search topics and related bids and sets the cost per click . You can even ask Google to automate bidding to increase your click-through rate.

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

How to reduce the cost per click

Because advertising can get very expensive when you pay per click, you need to have a plan to avoid paying too much per click. This means researching and creating a strategy with keywords to increase your Quality Score, a big measure of how well your ads compete with others.

Increase your quality level

Your Quality Score is crucial to increasing your clicks and reducing your costs. You can improve your Quality Score by adjusting:

• Expected click-through rate: you can edit the ad to make it more appealing to your target customers, highlight features and benefits, and most importantly, make sure your ad details match your keywords.
• Ad relevance: Your ad should appeal to your audience and their search intent. Look at the search results for different phrases and analyze the results.
• Landing page experience: Landing pages must be relevant to the audience that clicks on the ad. For example, an advertisement for a widget should not lead to a landing page containing widgets. Also, your landing page loading speed should be fast enough on mobile devices and desktops that potential customers don’t have to wait.

Keyword research

Keywords generate searches on the Internet. So it makes sense to make sure your ads contain keywords that drive people to your website. Some techniques you can try are:

• Targeting: you should try to target your audience by matching the text of your ad with what they are looking for.
• Split: you can divide your ads into groups with different keywords and match them to other searches.
• Grouping: Grouping involves creating themes for your products and services, for which you then create group names and use keywords that match searches. For example, if you’re marketing headphones, you can group them into over-ear and in-ear headphones and target your audience with matching keywords.

Alternatives to cost per click

There are many 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’s website affiliates to place advertisements that reach shoppers on and off the website when they search for specific products.

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

CPC versus CPM

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

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

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

Advantages and disadvantages of CPC advertising

The benefits explained

• Upper value: Cost-per-click advertising is more popular than CPM advertising because it indicates that an ad prompted a potential customer to take the first step toward an action, whether that be making a purchase or get more information.
• Generates website traffic: Cost per click is generally considered more effective because it drives traffic to the advertiser’s site.

Disadvantages Explained

• More expensive: CPC is more expensive than CPM
• Prices vary greatly: Since prices vary due to other factors, you may pay less or more depending on your Quality Score, Bids, Sponsorship and other factors.
• Less effective for brand and product awareness: CPM is better for brand recognition and product awareness, assuming page visitors at least see the logo and, even subconsciously, absorb the message.

The essential

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

The pay-per-click advertising model emerged with the Internet. It added an actionable element in the ability to immediately click a link to get more information, place an order, claim a coupon, or download an app.

Software for creating ads and buying advertising space is becoming more and more sophisticated. However, the main concern for advertisers when using cost per click or cost per impression models is the accuracy of reporting on the actual numbers achieved by the ad.