CPC (Cost per Click) explained

CPC (cost per click) is a metric that determines how much advertisers pay for the ads they place on websites or social media, based on the number of clicks the ad receives. CPC is important for marketers to consider, since it measures the price is for a brand’s paid advertising campaigns. The goal of marketers should be to reduce the price of clicks while also cultivating high-quality clicks, and consequently satisfied customers.

What is CPC?

CPC is the cost per click that an ad receives. It’s a metric that applies to all types of ads, whether they have text, images, or videos. It applies to ads that appear on the results page of search engines, display ads, and ads that appear on social media, too. Thinking about CPC should be one of the Sponsored Products best practices used by brands, because finding an accurate bid on certain keywords helps determine the value of advertising campaigns.

What’s the difference between CPC vs CPM?

It’s important for brands to measure their digital marketing metrics, including comparing CPC vs CPM (cost per mille, or the cost per 1,000 ad impressions). The click-through rate (CTR) of an ad, landing page, or article is the rate of the number of clicks to another page that it receives. CPC is based on the number of actual clicks the ad receives, while CPM is based on the number of times an ad is viewed, regardless of whether customers click on it or not. Brands can use both metrics, considering the implications of each, for a more comprehensive view of the performance of their ad campaigns.

How to calculate cost per click

CPC equals the average amount paid for each click on an ad. A high number of clicks, or visits on an ad, mean that the ad is getting attention from customers. Various advertisers can bid on ad placement on websites and popular keywords, and so each brand’s optimal CPC is determined by its ad ranking as well as the ranking of other related brands and products. The more in-demand a keyword is in the auction and the higher the ad placement, the higher the advertising costs.

What is average cost per click?

The average cost per click is easy: It’s the average amount spent on each click for an ad. Typically, ads placed on search engine pages will cost more than ads placed on a brand’s website. The rank of ads changes frequently, so there won’t be a set number for the CPC of a brand’s ad.

What is maximum cost per click?

The maximum cost per click is a brand’s bid on ad placement and keywords, which means it’s the highest price they’re willing to pay. Luckily, though, the brand will typically not pay the entire maximum cost per click. Based on related brands and quality scores in search, the actual CPC will often be lower than that initial bid.

What is manual cost per click bidding?

Once a brand decides on its maximum cost per click, it needs to decide if it wants to use manual cost per click bidding or automatic cost per click bidding. Manual cost per click bidding means that the brand chooses its own individual bid amounts. For a more automatic option, brands can use enhanced cost per click bidding instead.

What is enhanced cost per click bidding?

An alternate option to manual cost per click bidding is enhanced cost per click bidding, where the brand sets their overall budget and then has their bids automated based on that. Enhanced cost per click bidding is a feature that’s been added to search engines including Google AdWords and Microsoft Bing. Sponsored Display uses automated bidding to adjust your bid based on conversion.

Advantages and disadvantages of pay per click (PPC) advertising

There are upsides and downsides to PPC advertising, which is measured by CPC and CPM: CPC is more directly correlated to the purchases made by customers, while CPM could help reach a goal of increasing brand awareness. This will often result in CPC advertising being higher priced but also more valuable in getting customers to the next step in their shopping journey, since CPC is directly linked to the click-through rate (CTR) of customers who have viewed the ads.

How to lower CPC

The goal of all brands should be to have a low CPC. That means that ads should have optimization for high value at a low cost. Additionally, CPC should be proportionate to the overall profits of brands, since the ultimate goal of CPC is to drive sales. Most brands don’t want to spend more on ads than their income is, so budgeting can be crucial.

CPC FAQs

What’s the difference between PPC and CPC?

PPC and CPC are describing the same thing: PPC is the system of brands paying per click on an ad, and CPC is the metric used to measure those clicks.

How can brands begin advertising and determining CPC?

Sponsored Products and Sponsored Brands use CPC to determine how much advertisers need to pay, based on the clicks of customers. By becoming aware of their CPC optimization and figuring out what their cost per click currently is, and what it should be, brands can start making their ad campaigns even smarter.

1 Statista, Global Programmatic Advertising Spending, 2021
2 eMarketer, Programmatic Digital Display Ad Spending Forecast, June 2021