Cost-per-click (CPC) is a paid advertising metric used to measure how much advertisers pay for each click of a pay-per-click (PPC) advertisement. You can use the cost-per-click calculator or the cost-per-click formula to calculate the cost per click: (lower than your ad position/your quality score) + $0.01 = cost per click.
When running a PPC or social media campaign, you need to monitor critical metrics (such as cost-per-click) to help you attract more customers with less money.
Cost-per-click is a crucial digital marketing metric. It is the cost you pay when a user clicks on an ad. It provides insights into how much your business pays for someone to click on your ad, and it gives you incentives to reduce the cost-per-click of your ad.
Read on to learn more about the meaning of CPC, along with:
- How does cost-per-click in marketing work
- How to calculate cost per click
- What the average business pays for each click
- How to reduce cost per click
- And more!
What is CPC?
Cost-per-click or cost-per-click is a pay-per-click bidding model that allows you to pay every time someone clicks on your ad. Your cost-per-click is the cost you need to pay when someone clicks on your ad, and it is calculated every time you PPC bidding.
Why is CPC so crucial in marketing and advertising?
In advertising and marketing, cost-per-click is essential because it can help you:
- Understand how much you spend to get clicks on your ads
- Compare the performance of your campaign with your competitors
- Identify which ads, ad groups, or campaigns provide the best return on investment
Essentially, your cost-per-click can be used as a thermometer to measure advertising effectiveness and advertising strategy. If the cost per click is too high, it means that you may still have much room for improvement, for example, by improving your quality score or adjusting your ad targeting.
What determines your cost-per-click?
The following factors determine your cost-per-click, whether you advertise on Google or Bing:
- Maximum bid: Your maximum bid is the price you are willing to pay when someone clicks on your ad.
- Quality score: Quality score comes from several factors, such as keyword relevance, landing page quality, and click-through rate (CTR).
- Ad Rank: Your ad rank comes from factors within and outside your control, such as the user’s search environment, the quality of ads at auction, and the number of bids.
To understand how cost-per-click in advertising works, check out the following example:
Based on the above example, you can see that a high bid does not mean winning the auction. If you maintain a high-quality score and a high ad rank, you can get a decent return from PPC advertising.
How to calculate cost-per-click: cost-per-click formula
Now that you know the definition of CPC let us continue to introduce how to calculate CPC. For PPC, you can use a simple formula.
The CPC formula is:
This formula can help you determine how much you need to pay each time someone clicks.
How to calculate cost-per-click: average cost-per-click formula
Although you can check your cost-per-click at any time, it’s often helpful to understand the usual cost-per-click when discussing cost-per-click in ads. You can calculate the amount of a specific ad group or campaign, for example, to understand the effectiveness of the strategy.
The CPC formula used to calculate the average CPC is:
Your cost-per-click (or cost-per-click) depends on the ad network and its specific factors.
Google Ads
Google Ads uses the following factors to calculate your cost-per-click:
Highest bid
The first factor that affects the price you pay for cost-per-click ads is the maximum bid.
That is the amount you are willing to pay every time someone clicks on your ad. Your actual cost-per-click may be lower than the maximum bid, but you need to set the maximum bid to the upper limit of the cost of acquiring potential customers.
Ad rank
Ad rank also affects your cost-per-click. Your ad rank is a value that determines the position of your ad relative to other ads. It gets based on your bid amount, the quality of the advertisement at auction, the search object’s environment, and other factors.
Quality Score
Quality Score is how Google AdWords scores ads. It depends on your click-through rate, the relevance of the keywords, and the landing page’s quality. You must choose the right keywords and add a useful landing page next to them to improve your quality score.
Social Media
In contrast, social media networks like Facebook use the following factors to calculate your cost-per-click:
Bid Amount
When you want to run social media ads, you must state how much you are willing to pay for a particular operation. Some examples could include clicks, conversions, views, and more. It is up to you to set the amount that you will spend every time someone manages to complete the actions.
Remember, you are competing with other companies for ad placement. Your bid will affect whether your ad can rank.
Advertising Relevance
One of the significant advantages of social media advertising is that you can target specific people you want to attract. You can find the people who are most interested in your business. Because your ads are relevant, they get integrated into the news feed of your audience.
It looks like another Instagram photo or tweet. This way, potential customers are more likely to click on them because they are relevant ads like other posts.
That is why your ads must be relevant to your audience. Social media sites hope to continue to provide a seamless experience where content and advertising blend together. Your ad content must be relevant to your audience because it affects your cost-per-click.
The relevance of your ads depends on engagement and ad clicks. If your engagement rate is high and you get many clicks, this will affect your social media advertising cost. Social media sites (such as Facebook) consider this factor when determining advertising costs.
Ad Placement
Depending on the placement you choose, advertising costs will vary. For example, you can select a news source, sidebar, or mobile app location.
Social Media Platform
Each platform charges different rates for advertising.
Check the average cost-per-click for the following social media networks:
Audience
If multiple companies compete for the same audience, CPC will increase due to increased competition and restrictions on advertising space.
Time of day
If dozens of companies compete in advertising simultaneously to attract similar audiences, this will affect your cost-per-click.
What is the average cost-per-click for Google Ads?
The average cost per Google Ads (also known as Google AdWords) is $1 to $2. If you advertise on the Google Display Network, the average cost per click is less than $1. Simultaneously, the average cost per click on the Google search network is $1 to $2.
What is a good CPC in Google Ads?
To understand what makes CPCs “good,” consider some industry averages. Fortunately, data get used in more than ten industries, including business-to-business (B2B), e-commerce, and industrial services.
Browse the table below to learn more about CPC advertising costs in your industry:
Three ways to reduce cost-per-click
If you want to see the best results in your campaign, you need to keep your CPC low. You can reduce CPC advertising costs through the following three methods.
1. Optimize your audience
The audience is an essential factor that affects cost-per-click and the cost-per-click of social media ads. After all, you want to target users who are interested in your product or service and get them to click on your ad. If you want to lower your cost-per-click, please optimize your audience.
First, decide whom you want to advertise with. If you are not sure who your target audience is, consider who is most likely to buy your product. What is your ideal customer?
Consider things like age, gender, occupation, marital status, buying habits, and hobbies. These will affect your audience’s buying decision. Single women aged 25-35 who like kayaking have different desires than married men aged 50-65 who like golf.
By improving your audience, you can determine whom you want to reach. You don’t need to narrow your audience to a specific group to target that group. Your business can group multiple types of customers.
Take baby products as an example. You may have a group of parents who sell your products, but they are not the only ones buying baby products. Here, you will have a separate group of aunts, uncles, or grandparents who also buy baby products.
By improving your audience, you can provide more relevant content to target customers. That will help increase the attractiveness of ads, thereby reducing cost-per-click.
2. Make relevant ads
It may look to be obvious, but one of the most important things to increase your CPC is to make relevant ads. Advertising relevance affects PPC and social media advertising.
With PPC, advertising relevance belongs to the quality score. That is one of the essential factors that affect the quality score of the ad. Google will determine your ad is suitable for the keyword-based on the keywords and ads you choose.
When the Quality Score is higher, you will get higher ad placements and more valuable potential customers. Since your ads are very relevant, you can also set a lower cost-per-click. That is a way to reduce cost-per-click through PPC advertising.
For social media advertising, advertising relevance is a direct factor in your cost-per-click. Social media sites want to deliver the most relevant ads to the right audience. The more relevant your ad is to your audience, the lower the cost.
Creating relevant advertising content will help you keep your CPCs low. It can also help you bring better results to your campaign because you will attract your target audience with content of interest.
3. Use detailed call-to-action (CTA)
Call to action (CTA) is one of the most important parts of advertising. It tells your audience how to proceed.
CTA is essential to guide the right audience. Many potential customers will like what they see in the ad and want to take the next step. Without CTA, your audience will not know the next step.
With PPC advertising, you need to integrate an engaging CTA on your landing page. That will help you capture more valuable potential customers for your business.
Be sure to detail your CTA. Don’t just say “click here” and hope the audience is excited about it. “Click here” does not tell them what happens when they click the button, nor does it trick them into clicking.
A CTA like “Download Free Gift Vouchers” can tell listeners what will happen if they click a button. People who want to get a gift from your company get tempted to click the button and get their voucher.
In social media campaigns, you also need to add CTA. Many social media platforms provide a series of CTAs for your campaign. It would help if you chose the CTA that is most relevant to your campaign.
For example, if you want people to sign up for your email list, CTAs like “click here” or “join us” are not suitable for your campaign. Instead, you want to use CTAs that include the words “register now” or “join our mailing list” because they are related to the actions you want your audience to take.
Choosing the right call to action can encourage you to interact with the ad. You will attract more viewers to participate. Not only can it help you get more potential customers and conversions, but it can also lower your cost-per-click due to high engagement.
Frequently Asked Questions about CPC
Learn more about CPC through the following frequently asked questions:
Would a higher or lower CPC be better?
You always want a lower cost per click. A lower marketing cost per click means you can increase the number of clicks to your budget, which means potential customers. It can also ensure that you get a high return on investment (ROI) because you can get many more returns than you spend.
It’s important to consider the cost-per-click of the products you sell in your ads. If the average sales revenue can bring your business $20 in revenue and your cost-per-click is $10, then your profit margins are minimal. A lower cost per click, such as $2, can lead to a better investment return.
What is the difference between CPC and CPM?
When you look at CPC, you will also see cost-per-thousand-impressions (CPM). CPM stands for cost per “mile,” where M stands for Roman numerals for 1000 (1000 impressions). So, what is the difference between the two?
CPC focuses on the cost of each person who clicks on your ad. CPM focuses on the number of people who see your ad but don’t necessarily click on it. CPM focuses on impressions and attracting users through advertising, while cost-per-click is focused on attracting people and making them click on ads.
What is going to be the best for your company?
When placing PPC advertising, most companies will only focus on measuring their CPC. PPC visitors are over 50% more likely to convert when compared to natural visitors, and it is your job to attract these potential customers to click on ads and get conversions.
If you want to focus on the CPM of PPC ads, you can do the same. People will still see your ad and become familiar with your brand. It can help you show your brand, new products, or new services to your audience, helping you get business conversions.
For social media, many companies measure both CPM and CPC. Since social media advertising tends to get integrated into news sources, it is very suitable for building brand awareness. You can attract more people and show them to your brand.
When you pay attention to CPCs with social ads, you focus on attracting potential customers to your social media page or website. You can easily track this metric to understand how your audience interacts with the ad.
Overall, if you want to increase brand awareness, CPM is the best measure. It will help you focus on getting as many impressions as possible with your budget.
On the other hand, if you are more focused on getting conversions, then CPC is more appropriate. The point of cost-per-click is to keep the cost low to win more clicks and thus get more potential customers who convert.
Lower cost per click
When running a campaign, you want to keep your cost-per-click low to get more clicks on your budget. Lower advertising cost per click will allow you to get a higher return on investment in your campaign
