What Is CPC?
“What is CPC?” is a question many businesses are asking themselves these days. As companies try to navigate this new digital age, this is just one question that comes up again and again. So what is CPC, how does it work, and how can it help?
While only focusing on what can be measured doesn’t work in the world of marketing, with some of the most successful companies choosing outcomes over methods, CPC is undeniably helpful when it comes to successfully monitoring marketing metrics.
Cost Per Click
CPC, or cost per click, is a model in which you pay every time somebody clicks on your ad. Cost per click (CPC) is an online advertising revenue model that websites use to bill advertisers based on the number of times visitors click on a display ad attached to their sites.
Cost per click shows you how much your business is paying for people to click on your ads so you can prioritize your budget as well as see what’s working – or not working.
Cost per click is commonly used by advertisers who have a set daily budget for a campaign. When the advertiser’s budget is reached, the ad is automatically removed from the website’s rotation for the remainder of the billing period. For example, a website that has a CPC rate of 10 cents would bill an advertiser $100 for 1,000 click-throughs.
CPC is a factor in ad types including:
- Text ads
- Shopping ads
- Image ads
- Video ads
- Twitter promoted tweets
- Facebook ads
- Instagram ads
- LinkedIn ads
What is CPC formula?
The definition of CPC is how much you pay each time someone clicks on your ad. There are two different formulas to calculate true cost per click, one specific to Google Ads and one to calculate general cost.
The Cost Per Click formula for Google Ads is:
CPC = (Ad Rank of the Ad Below Yours/Your Quality Score) + $0.01
To calculate how much you are paying per click, the equation differs slightly:
CPC = Total Ad Cost/Total Number of Ad Clicks
Related metrics that involve CPC include average cost per click and maximum cost per click. Within paid advertising platforms like Google AdWords, there are certain strategies like enhanced cost per click and manual cost per click bidding that marketers may want to utilize depending on their goals. Enhanced cost per click is an automated conversion bidding strategy in Google AdWords for certain types of ads that appear on Google’s Search Network and Display Network. Enhanced CPC is used if your goal is to maximize ad conversions.
How to calculate average cost-per-click for your campaigns
Average CPC is also important. Your average CPC for a campaign can tell you how your campaign is actually doing. Here’s the formula:
Total CPC/Total Click = Average CPC
Cost-per-click advertising is more highly valued and more expensive than traditional advertising because it indicates that an ad has gotten a prospective customer to take the first step towards taking action, whether it is making a purchase or getting more information.
Cost-per-click pricing varies widely since it is usually a bidding process among advertisers for display on the pages that are called up with the most pertinent search words. A sponsored product ad on Amazon, for instance, costs about 81 cents per click.
How to lower your CPC
Improving the quality of your traffic is a great way to lower your CPC. Essentially, improving your Quality Score, a diagnostic tool used to see how your ad quality compares to that of other advertisers, can lower your CPC. Some ways to improve your Quality Score include using relevant keywords, quality ad and landing pages, and improving your click-through rates.
Demographic targeting of advertising was created offline, primarily by the print magazine industry. It allowed advertisers to choose a specialty magazine that reached the audience that was most likely to be interested in their product.
The cost-per-click advertising model emerged with the web. It added an actionable element in the ability to immediately click on a link in order to get more information, place an order, claim a coupon, or download an app.
The software for creating ads and buying ad space is growing increasingly sophisticated. However, the primary concern of advertisers in using either the cost-per-click or cost-per-impression models is accuracy in the reporting of the actual numbers that the ad reaches.
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