What is cost per click (CPC)?

If you are learning digital marketing, this term cost per click must be familiar with you. Cost per click also called as pay per click. Now let’s take a look at what is Cost Per Click, why it is important and where to use it.

What is cost per click?

Cost per click is a bidding model and it determines how much advertisers pay for their ads. Google’s technical definition of cost per click is like this.

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

How to calculate cost per click?

You can calculate cost per click by dividing total ad cost by the number of clicks you received. For example you spent $500 in a day and you received 100 clicks. Your calculated CPC is $5.00.

CPC allows advertisers to set a maximum cost-per-click from a campaign. But it doesn’t mean you have to pay that each time. The final amount charged for a click is called actual CPC. You only have to pay the minimum required amount to beat the competitor’s Ad Rank who is at below you.

Why is cost per click important?

Cost per click is important in digital marketing and there are many reasons for it. It is a useful KPI to help understand below factors.

  • Relative ROAS (return on ad spend) based on budget and CPC.
  • Plan and forecast estimated traffic based on budget.
  • Competitive insights on how the average CPC compares to the market.
  • Your relative ad strength.

You might think before that CPC only gives how many clicks you get. But it’s not true. It gives more insights. Understanding CPC guides more accurate forecasts. For example if you have got a high cost per click but a low daily,  budget, those clicks must work much harder to get a target ROAS. You need to fully optimize your website as the way users can get best experience. This will encourage your sales.

Pay per click helps to understand how competitive you are in the keyword auctions. If you are getting a low CTR (click through rate), your maximum CPC could be less than your competitors. CPC helps to determine your ad strength and ad rank.

After reading this, you might be thinking CPC is the marketing campaign’s main KPI (key performance indicator). But it’s not. There are other KPIs that determine campaign success. CPC a good indicator of present competition and future performance.

What is a good CPC?

good CPC

There are many factors caused for good CPC. Ideal cost per click should include these factors. They are given below.

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

Now take a look at them one by one. Different industries have different CPCs. For example, according to an early 2022 study from LOCALiQ by Wordstream, Attorneys and Legal Services have the highest average CPC of $8.67. Real Estate industry has the lower CPC and it is $1.36.

Competition is a factor that helps to determine a good cost per click. If the competition on a keyword is high, probably they have the highest CPC. If competition is lower  you can expect a lower CPC.

The nature of your targeting keywords can be caused for CPC. If someone is searching for your brand,  your cpc should be lower than other non branded keywords. If someone bidding on their brand terms, their Ad Rank is highest for those terms.

A high Ad Rank also helps contribute to those who have  lower CPCs. Non-branded keywords have got higher CPCs because of their competitive nature. Bidding strategy and maximum CPC caused for ad rank score. To sum this up, a good cost per click  depends on the industry, competitiveness, and ad rank of the targeted keywords.

What ad platforms use CPC bidding?

Almost all ad platforms use cost-per-click. Specially search platforms like Google and Microsoft Ads use cost-per-click bidding. These platforms offer automated bidding strategies. They help take the busy work out of managing individual keyword bids. Strategies like Maximize Clicks or Enhanced CPC, allow to set a maximum CPC. These platforms allow to use their algorithm to increase or decrease bids automatically.

Social media platforms also have this CPC bidding. Some of platforms are,

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

You can use any of these platforms and launch a campaign using CPC bidding.

What Are CPC And CPM?

CPM bidding is a standard model in advertising just like CPC. CPM stands for pay per thousand impressions. In CPM bidding, advertisers pay per 1,000 impressions on their ads. CPM mainly focuses on views and impressions. Therefore its intent is different from CPC. If someone using CPM, their target is to get more ad reach than traffic.

CPM bids are lower than some CPCs. Because they’re mainly use in Display networks. The most important thing in CPM is, it is cost effective way to reach a large audience. If your campaign’s main goal is awareness, CPM bidding is a good choice instead of using CPC bidding.

Final thoughts

Getting a better idea about what is cost per click and why it is important will lead your campaign for success. You can try either manual CPC bidding or automated bid strategies while managing your costs.

Frequently Asked Questions

Is a low CPC good

You always want to have a lower CPC. Getting a  low CPC in marketing means you can get more clicks for your budget.  Which means you can get more potential leads. It ensures  you have a high return on investment (ROI) because you’ll earn more money back than the amount you spent.

How do I get my CPC down?

There are many things you can do to get your CPC down. You can use long-tail keywords and use new match types. You can try new keyword variations also. Using negative keywords also helpful to get lower CPC. You can change your bidding strategy or lower your keyword bids. Focusing on quality score and making your Ads more relevant is important.

What is CPC bid limit?

CPC bid limit is the bid that you set to determine the highest amount that you’re willing to pay for a click on your ad. If someone clicks on your ad, that click won’t cost more than the maximum CPC bid that you set.

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