What is Cost-Per-Click (CPC)?
Cost-per-click (CPC) - sometimes also called Pay Per Click (PPC) - is a digital advertising pricing model where the advertiser pays each time a user clicks on one of their ads.
It's a way for advertisers to only pay for actual clicks on their ads rather than just impressions or views.
CPC is typically used in paid search campaigns, display advertising, and social media advertising. The cost per click can vary depending on the industry, competition, and specific targeting options used in the ad campaign.
Why CPC is important?
Cost per click (CPC) is an important metric in digital advertising because it provides insights into the relative strength of your advertising efforts, as well as your ability to generate traffic and maximize your return on investment (ROI).
Furthermore, it is important in the following ways:
Firstly, by calculating your CPC and comparing it to your budget, you can gain an understanding of your relative ROAS (return on ad spend). This means you can assess how effectively your ad spend is translating into actual clicks and conversions, and make data-driven decisions about how to optimize your campaigns for maximum ROI.
Secondly, by analyzing your CPC and forecasting estimated traffic based on your budget, you can plan and adjust your advertising efforts to achieve specific business objectives. This can help you to allocate your resources more effectively and ensure that you are getting the most value for your advertising spend.
Thirdly, by comparing your average CPC to the market, you can gain competitive insights into your relative ad strength. This can help you to assess your position within the market, as well as identify areas where you may be able to improve your targeting or bidding strategies in order to stay competitive and maximize your ad performance.
Lastly, CPC is important if analyzed in the context of return on investment (ROI) and the quality of the traffic generated. Some keywords with a high CPC may actually be more valuable due to their ability to generate high-quality traffic that converts into customers.
How CPC, CPA, and CPM are different?
CPC, CPA, and CPM are all different pricing models used in digital advertising.
Here's what each one means:
CPC (Cost-per-click): In this model, advertisers pay for each click on their ads. This pricing model is commonly used in search engine advertising and social media advertising.
CPA (Cost-per-acquisition/action): This model charges advertisers based on a specific action taken by the user, such as filling out a form or making a purchase. CPA is often used in affiliate marketing or lead generation campaigns.
CPM (Cost-per-thousand/mile): In this model, advertisers pay for every 1,000 times their ad is shown to users, regardless of whether or not the user clicks on the ad. CPM is often used in display advertising campaigns.
How does CPC work?
CPC is commonly used in search engine advertising and social media advertising, where advertisers bid on specific keywords or target audience demographics to display their ads to potential customers.
When a user searches for a particular keyword or matches a specific demographic profile, the ad auction process begins.
Advertisers compete against each other for ad placement based on the maximum bid they are willing to pay for each click on their ad. The ad with the highest bid and quality score wins the auction and is displayed to the user.
If a user clicks on the ad, the advertiser is charged the maximum bid amount. However, if no user clicks on the ad, the advertiser does not pay anything, making CPC a performance-based pricing model.
CPC is beneficial for advertisers as it allows them to only pay for the clicks they receive, ensuring that their advertising spend is being used efficiently and effectively.
How is cost per click calculated?
Cost per click (CPC) is calculated by dividing the total cost of a digital advertising campaign by the number of clicks generated by the campaign.
This calculation is used to determine the average cost that an advertiser pays for each click on their ad.
The formula for calculating CPC is:
CPC = Total Cost of Campaign ÷ Number of Clicks
For example, if an advertiser spent $100 on a campaign that generated 50 clicks, the CPC would be:
CPC = $100 ÷ 50 clicks = $2 per click
It's important to note that the cost of a click can vary depending on factors such as the industry, competition, and targeting options used in the campaign.
Advertisers can set a maximum bid for their desired CPC in order to control their advertising costs and optimize their campaigns for maximum ROI.
Apart from this average cost per click, there are some other metrics related to it:
Maximum cost per click
As Google defines it, the maximum cost per click (Max CPC) is the highest amount an advertiser is willing to pay for a single click on their online advertisement.
Max CPC is a key component of pay-per-click (PPC) advertising, where advertisers bid on keywords or ad placements in an auction-based system.
In a Max CPC bidding strategy, the advertiser sets a maximum bid for a specific keyword or ad placement.
If their bid is higher than the bids of other advertisers competing for the same keyword or placement, their ad will be displayed in a prominent position.
Manual cost per click
Manual cost per click (CPC) means that the advertiser manually sets the maximum amount they are willing to pay for each click on their ad, rather than relying on an automated bidding system.
With manual CPC bidding, advertisers have more control over their budget and can adjust their bids based on specific keywords, ad placements, and other targeting options.
This bidding strategy can be effective for advertisers who have a deep understanding of their target audience and know how much they are willing to pay for each click.
However, it requires ongoing monitoring and adjustment to ensure that bids are competitive and effective in achieving advertising goals.
Enhanced cost-per-click (ECPC)
Enhanced cost-per-click (ECPC) is a bidding strategy used in online advertising, particularly in Google Ads.
This strategy uses an automated bidding system that adjusts the maximum cost per click bid based on the likelihood of the ad generating a conversion.
With ECPC, Google Ads will increase the maximum CPC bid for ad auctions that have a higher chance of resulting in conversions and decrease the bid for ad auctions with a lower chance of conversions.
This is based on factors such as the user's location, device, and other browsing behaviours.
What is a good CPC?
There is no universal answer to what a good cost-per-click (CPC) is, as it can vary widely depending on factors such as the industry, competition, targeting options, and campaign objectives.
In some industries, such as finance or healthcare, the CPC can be very high due to the competitive nature of the market and the high value of each click.
In other industries, such as niche or specialized markets, the CPC can be lower due to less competition and a smaller target audience.
Instead of focusing on a specific number for what constitutes a good CPC, it's more important to assess the relative value of each click in the context of your specific campaign goals and budget.
For example, if you are running a campaign with a limited budget, a lower CPC may be more desirable in order to maximize your ROI.
On the other hand, if you are focused on generating high-quality leads or conversions, a higher CPC may be necessary to attract the right audience and achieve your objectives.
Ultimately, the goal is to achieve a CPC that allows you to generate the desired volume and quality of traffic while also staying within your budget and maximizing your ROI.
Factors on which CPC depends
The factors that can influence what constitutes a "good" cost per click (CPC) can include:
As discussed earlier, different industries can have different levels of competition and varying values per click.
For example, industries such as finance or healthcare tend to have higher CPCs due to the high value of each click and the competitive nature of the market.
The targeting options used in your campaign can impact the CPC. For example, if you are targeting a very specific audience, the CPC may be higher due to the smaller pool of potential clicks.
The placement of your ads can affect the CPC, as ads that appear in more prominent or high-traffic areas of a website or search engine may command a higher CPC.
Ad quality and relevance
The quality and relevance of your ads can impact the CPC, as ads that are more relevant to the user and have higher click-through rates may result in a lower CPC.
Ad bidding strategy
Your ad bidding strategy can impact the CPC, as setting a higher bid may result in a higher CPC in order to win the ad auction and secure ad placement.
The objectives of your campaign can impact the CPC, as campaigns focused on generating high-quality leads or conversions may require a higher CPC to attract the right audience and achieve the desired results.
How to find CPC for your keywords?
You can use tools to find the CPC value of your keywords.
Find CPC with Google Keyword Planner
To find a keyword's cost per click (CPC) using Google Keyword Planner, you can follow these steps:
Sign in to your Google Ads account and navigate to the "Tools & Settings" option in the top right corner.
Select "Keyword Planner" from the dropdown menu.
Select the "Discover new keywords" option.
Enter the keyword or keyphrase you want to analyze and select your target audience and location settings.
Click "Get Results."
Review the results and look for the "Avg. CPC" column to see the estimated cost per click for each keyword.
Find CPC with SEMrush
To find a keyword's average cost per click (CPC) in SEMrush’s Keyword Magic Tool, follow these steps:
Enter your keyword in the search bar and hit "Search."
The Keyword Magic Tool will show a table with keyword data, including the estimated CPC for each keyword.
Look for the CPC column on the right-hand side of the table to see the estimated cost per click for each keyword.
You can also view CPC data for other related keywords in the same table.
How to find CPC for competitor's keywords?
Finding the cost-per-click (CPC) for competitor's keywords can provide valuable insights for your own online advertising campaigns.
Here are the ways to find the CPC for your competitor's keywords:
Identify your competitor's keywords
Use tools like SEMrush, Ahrefs, or Google Keyword Planner to identify the keywords that your competitors are targeting in their online advertising campaigns.
Use Google Ads Keyword Planner
Once you have identified your competitor's keywords, enter them into the Google Ads Keyword Planner tool.
This will provide you with data on the estimated CPC for each keyword.
Use third-party tools
There are several third-party tools that can help you estimate the CPC for your competitor's keywords, such as SpyFu, iSpionage, and KeywordSpy.
These tools provide insights on CPC, ad positioning, and other metrics for your competitor's keywords.
Monitor your competitor's ads
Keep an eye on your competitor's ads and their positioning to get a better idea of their bidding strategy and how much they are willing to pay for each click.
How to optimize for CPC?
You can go through the following steps to optimize your CPC campaign:
Improve quality score
A higher quality score means that Google considers your ads to be more relevant and valuable to users.
To improve the quality score, focus on improving ad relevance by using keywords in ad copy and ensuring that landing pages are relevant to the ad's message.
Choose the right keywords
Start by conducting thorough keyword research to find keywords that are relevant to your business, but also have lower competition and cost.
Use keyword research tools like Google Keyword Planner, SEMrush, or Ahrefs to find these keywords.
Test ad copy and landing pages
Experiment with different ad copy and landing page designs to find what works best for your audience. Conduct A/B testing by creating multiple ad variations and testing them against each other to identify which performs better.
Use the insights gained from testing to refine your messaging and design to improve ad relevance and user experience.
Use targeting options, such as demographics, locations, and interests, to reach a more specific audience.
Refining your targeting can help improve ad relevance and reduce wasteful spending on clicks from uninterested users.
For example, if you're a local business, target users within your city or region to maximize relevance and reduce ad spend on users outside your service area.
Improve the loading speed of your landing page. A slow-loading page can hurt your Quality Score and result in fewer clicks.
Make sure your landing page is optimized for mobile devices. More and more users are accessing the internet through their mobile devices, so it's important to ensure your page is mobile-friendly.
Monitor and analyse your historical performance data to identify areas for improvement. Use this data to optimize your campaigns and improve your Quality Score.
Bid on long-tail keywords
Bidding on long-tail keywords can be an effective strategy for CPC optimization. Long-tail keywords are specific phrases that users are more likely to use when searching for a particular product or service.
These keywords often have lower competition, resulting in lower CPCs, and they can also improve the relevance of your ads to the user's search query.
To optimize your CPC campaigns with long-tail keywords, follow these steps:
Conduct keyword research to identify relevant long-tail keywords that are related to your business or products/services. Use keyword research tools to find keywords with low competition and high search volume.
Group your long-tail keywords into ad groups based on their relevance to your ads and landing pages. This will help you create targeted ads that are more likely to result in conversions.
Write ad copy that includes the targeted long-tail keyword and highlights the unique benefits of your products/services. Use a clear call-to-action to encourage clicks.
Ensure that the landing page is relevant to the ad copy and includes valuable information related to the search query. Make sure the page is easy to navigate and provides a clear path to conversion.
Monitor your CPC campaigns regularly to identify areas for improvement. Use performance data to optimize your bids and ad copy for better ROI.
Use negative keywords
Using negative keywords can also be an effective strategy for CPC optimization. Negative keywords are words or phrases that you add to your campaign to exclude certain search queries from triggering your ads.
By excluding irrelevant search queries, you can improve the relevance of your ads to the user's search intent, resulting in lower CPCs.
To optimize your CPC campaigns with negative keywords, follow these steps:
Review search terms
Review your search terms report to identify irrelevant search queries that triggered your ads. Look for search terms that are not related to your business or products/services.
Identify and add negative keywords
Identify negative keywords that you can add to your campaign to exclude these irrelevant search queries.
For example, if you sell luxury watches, you may want to add negative keywords like "cheap watches" or "discount watches". Now, add your negative keywords to your campaign as exact or phrase match types.
Monitor your CPC campaigns regularly to identify new irrelevant search queries. Add these search queries as negative keywords to improve the relevance of your ads.
Schedule your ad
Using ad scheduling is another strategy for CPC optimization. With ad scheduling, you can choose specific times of the day and days of the week to show your ads, allowing you to target your audience when they are more likely to be online and active.
Here are two ways you can use ad scheduling for CPC optimization:
Show ads at the best times
Use ad scheduling to show your ads at times of the day when your customers are more likely to be online and active.
For example, if you sell coffee, you may want to show your ads during the morning hours when people are searching for their caffeine fix.
Adjust bids according to time
Use ad scheduling to adjust your bids based on the time of day. You may want to increase your bids during peak hours when competition is high and lower your bids during non-peak hours when competition is low.
To schedule your ads on Google Ads, follow these steps:
Sign in to your Google Ads account and select the campaign for which you want to schedule your ads.
Click on "Settings" and then click on "Ad Schedule" in the left-hand menu.
Click on the "Edit" button to create a new ad schedule.
Select the days of the week and times of the day that you want your ads to be shown.
Choose whether you want to show your ads at all hours or only during specific times of the day.
Adjust your bids for each time slot if needed. You can increase your bids during peak hours and decrease them during non-peak hours.
Save your changes and review your ad schedule to ensure it is accurate.
Geotargeting is a strategy for CPC optimization that allows you to target your ads to specific geographic locations.
By identifying your target audience and setting up geotargeting in your Google Ads campaign settings, you can adjust your bids based on the performance of each location and monitor your campaign performance regularly to optimize your campaigns for better results.
By using geotargeting, you can ensure that your ads are being shown to the right audience, leading to higher click-through rates, better conversion rates, and lower CPCs.
This will also help you attract more qualified traffic to your site, resulting in a higher ROI for your advertising campaigns.
Utilize keyword match types
Using different keyword match types is another strategy for CPC optimization. Keyword match types determine how closely a user's search query must match your chosen keyword before your ad is shown.
By using different match types, you can control which searches trigger your ads and ensure that your ads are being shown to the most relevant audience.
There are four types of keyword match types:
Broad match: Your ad will show for searches that include your keyword or similar variations of your keyword.
Broad match modifier: Your ad will show for searches that include your keyword or close variations of your keyword, but not synonyms.
Phrase match: Your ad will show for searches that include your keyword in the same order as your keyword, with additional words before or after.
Exact match: Your ad will be shown for searches that exactly match your keyword.
Another strategy for CPC optimization is to use device adjustments. By adjusting your bids based on the device that your ad is being displayed on, you can optimize your campaigns for better performance and more targeted traffic.
To use device adjustments, you can increase or decrease your max CPC bid for mobile, tablet, and desktop devices based on their individual performance.
For example, if you find that your mobile ads are performing better than your desktop ads, you may want to increase your bids for mobile devices to attract more traffic from that platform.
To adjust bids by device:
Go to your Google Ads campaign settings
Select the "Devices" tab
From there, you can adjust your bid adjustment percentages for each device type.
Pros and cons of CPC
Like any advertising model, there are pros and cons to using CPC for your marketing campaigns.
With CPC, you only pay when someone clicks on your ad, making it a cost-effective model compared to other pricing models.
CPC allows you to set a maximum bid for each click, giving you control over your budget and the ability to manage your campaign spending.
CPC allows you to target your ads to specific audiences based on their search queries, location, and device, making it easier to reach your target audience.
CPC provides measurable results, allowing you to track the performance of your ads and adjust your campaigns accordingly for better results.
CPC is a highly competitive advertising model, with many advertisers bidding for the same keywords, leading to higher CPCs and making it difficult to stand out in a crowded market.
CPC is vulnerable to click fraud, in which individuals or automated bots click on your ads to drain your advertising budget.
Over time, users may ignore your ads intentionally or unintentionally, leading to lower click-through rates and reduced effectiveness.
While CPC can generate clicks and traffic, it may not always result in conversions, making it important to optimize your campaigns for better conversion rates.
Cost-per-click (CPC) can be a valuable advertising model for businesses looking to reach their target audience and generate traffic to their website.
It offers cost-effectiveness, control over budget, targeting options, and measurable results, however, it also has some downsides.
By weighing the pros and cons and optimizing your campaigns for better performance, you can make the most of CPC for your advertising efforts.