What Is Cost Per Click (CPC)? Launch Your CPC Campaign

What is cost per click (CPC)?

Cost per click (CPC) is a paid advertising metric that measures how much an advertiser pays for every click on their pay-per-click (PPC) ads. You can calculate CPC with a CPC calculator or the cost-per-click formula: (Ad Rank of the Ad Below Yours / Your Quality Score) + $0.01 = CPC.

Budgeting is a pretty important part of managing an advertising strategy. After all, advertising costs money, and your business can only afford to spend so much on your campaigns. That’s why it’s essential to track cost-related metrics when you’re running a pay-per-click (PPC) advertising campaign.

In particular, you should be sure to track cost per click (CPC). This metric is one of the simplest ways to see how much you’re spending on your campaigns. Since PPC campaigns charge you for each click your ads earn, it makes sense to know exactly how much you’re spending on each of those clicks.

But what exactly is CPC, and how does it benefit you? That’s what we’re going to answer on this page. In all, we’ll cover the following topics:

• What is CPC?
• Why is CPC important?
• What is the cost-per-click formula?
• How to calculate average cost per click for your CPC campaigns
• What is a good CPC for Google Ads?
• Why is CPC marketing important for businesses?
• What factors determine your CPC?
• How is CPC calculated on different platforms?
• What is the average CPC for Google Ads?
• 3 ways to lower your CPC

Keep reading to learn more. Then subscribe to Revenue Weekly, our email newsletter, to learn more about digital advertising!

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What is CPC?

CPC, or cost per click, is a pay-per-click bidding model where you pay every time someone clicks on your ad. Your cost per click is how much you pay when someone clicks on your ad, and it gets calculated every time the PPC auction runs.

Why is CPC important?

When you run PPC or social media campaigns, you’ll need to monitor critical metrics like cost per click to help you reach more customers for less money.

Cost per click is a critical digital marketing metric. It provides insight into how much your business pays for someone to click on your ad, as well as gives you the motivation to lower your advertising CPC.

What is the cost-per-click formula?

Now that you know the definition of CPC, let’s move onto how to calculate CPC. The CPC formula is:

(Ad Rank of the Ad Below Yours/Your Quality Score) + $0.01 = CPC

This formula helps determine how much you’ll pay each time someone clicks.

How to calculate average cost per click for your CPC campaigns

While you can check your CPC at any time, it’s often helpful when discussing CPC in advertising to know your average CPC. You can calculate this amount for a specific ad group or ad campaign, for example, to get perspective on your strategy’s performance.

The CPC formula for calculating your average CPC is:

Total CPC / Total Clicks = Average CPC

If you don’t want to calculate this amount manually, you can use our free CPC calculator.

What is a good CPC for Google Ads?

To understand what makes a CPC “good”, it’s helpful to have some industry averages. Luckily, data is available for more than 10 industries, including business-to-business (B2B), ecommerce, and industrial services.

Browse the table below to learn more about CPC marketing costs in your sector:

Why is CPC marketing important for businesses?

In advertising and marketing, CPC is vital because it helps you:

• Understand what you’re spending to earn clicks on your ads
• Compare how your ad campaigns perform against competitors
• Recognize which ads, ad groups, or ad campaigns deliver the best ROI

Essentially, your CPC can serve as a thermometer for gauging the performance of your ads and your ad strategy. If you have an inflated CPC, that means you probably have room for significant improvements, like by improving your Quality Score or adapting your ad targeting.

What factors determine your CPC?

The following factors determine your cost per click, whether you advertise on Google or Bing:

• Max bid: Your max bid is how much you’re willing to pay when someone clicks on your ad.
• Quality Score: Your Quality Score gets sourced from several elements, like your keyword relevancy, landing page quality, and click-through rate (CTR).
• Ad Rank: Your Ad Rank comes from factors inside and outside your control, like the context of a person’s search, the quality of your ad at auction time, and your bid amount.

For perspective on how CPC in advertising works, look at the following example:

Based on the above example, you can see that a high bid doesn’t equal winning the auction. If you maintain a high Quality Score and high Ad Rank, you can generate an impressive return from PPC advertising.

How is CPC calculated on different platforms?

Your CPC (or cost per click) depends on the ad network, as well as factors specific to that ad network.

Google Ads CPC

Google Ads uses the following factors to calculate your CPC:

Maximum bid

The first factor that influences the price you pay for CPC advertising is your maximum bid.

This is the amount you’re willing to pay each time someone clicks on your ad. Your actual CPC may be less than your maximum bid, but you need to set your maximum bid as your limit on how much you want to pay to obtain leads.

Ad Rank

Ad Rank also influences your CPC. Your Ad Rank is a value that determines your ad’s position in relation to other ads. It’s based on your bid amount, auction-time ad quality, context of the person’s search, and other factors.

Quality Score

Quality Score is how Google AdWords rates your ad. It’s based on your CTR, keyword relevancy, and landing page quality. You must choose the right keywords and accompany them with a useful landing page to improve your Quality Score.

Social media CPC

In comparison, social media networks like Facebook use the following factors to calculate your CPC:

Bid amount

When you want to run a social media ad, you have to state how much you are willing to pay for a specific action. Some examples include views, conversions, and clicks. You set how much you want to spend each time someone completes that action.

It’s essential to keep in mind that you’re competing with other companies for ad placement.

Your bid influences whether your ad gets the spot.

Ad relevance

One of the great things about social media ads is that you can target specific people that you want to reach. You reach people who are the most interested in your business. Since your ads are relevant, they blend into your audience’s newsfeed.

It makes it look like just another tweet or Instagram photo. This makes leads more likely to click on them because they are relevant ads that look just like other posts.

This is why it’s important that your ad is relevant to your audience. Social media sites want to continue to provide this seamless experience where content and ads blend together. Your ad content needs to be relevant to your audience because it influences your CPC.

Your ad relevancy is determined by engagement and clicks on your ad. If you have a high engagement rate and earn many clicks, it will influence the cost of your social media ad. Social media sites, like Facebook, take this into account as a factor when determining the cost of your ad.

Ad placement

Ads have different costs depending upon the placement you choose. For example, you may pick a newsfeed, sidebar, or mobile app placement.

Social media platform

Each platform charges a different rate for advertising.

Check out the average CPC for social media networks, below:

Audience

If multiple companies are competing for the same audience, it will increase the CPC because of the rise in competition and limited slots.

Time of day

If there are dozens of businesses competing to run ads at the same time to reach similar audiences, it will influence your CPC.

What is the average CPC for Google Ads?

The average cost for a Google Ads CPC campaign is $1 to $2. If you’re advertising on the Google Display Network, the average CPC is less than $1. Meanwhile, the average CPC for the Google Search Network is $1 to $2.

Learn More About Google Ads’ Costs

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3 ways to lower your CPC

If you want to see the best results with your campaign, you need to keep your CPC low. Here are three ways you can lower your CPC advertising costs.

1. Refine your audience

Your audience is a big factor that influences your CPC campaign for both PPC and social media ads. After all, you’re trying to target people who are interested in your products or services and get them to click on your ad. If you want to lower your CPC, refine your audience.

First and foremost, decide who you want to target with your ads. If you aren’t sure who to target, think about who is most likely to buy your products. What does your ideal customer look like?

Think about things like age, gender, occupation, marital status, buying habits, and hobbies. These all impact your audience’s decision to buy. Single females that are 25-35 years old that enjoy kayaking are going to have different desires than married men that are 50-65 years old and enjoy golfing.

By refining your audience, you get specific with who you are trying to reach. You don’t need to narrow your audience down to one specific group and only target that group. Your business can have multiple types of customers that are grouped together.

Take baby products for instance. You may have a group of parents that you market to, but they aren’t the only people who buy baby products. This is where you’d have a separate group of aunts and uncles or grandparents that also buy baby products.

By refining your audience, you’ll target leads with more relevant content. It’ll help increase engagement with your ads, which will lower CPC.

2. Create relevant ads

It may seem obvious, but creating relevant ads is one of the most important things you can do to improve your CPC. Ad relevancy influences both PPC and social media ads.

With PPC, ad relevancy falls under Quality Score. It’s one of the contributing factors to impacting the Quality Score of your ad. Google looks at your keyword selection and your ad to see that your ad fits that keywords.

When you have a high Quality Score, you get a higher ad placement and reach more valuable leads. It also allows you to set a lower CPC because your ad is extremely relevant. This is how you can lower your CPC with PPC advertising.

As for social media ads, ad relevancy is a direct influencing factor of your CPC campaigns. Social media sites want to deliver the most relevant advertisements to the right audience. The more relevant your ad is to your audience, the lower the cost.

Creating relevant ad content will help you keep your CPC low. It will also help you drive better results for your campaign because you’ll be reaching your target audience with content that interests them.

3. Use a detailed call to action (CTA)

Your call to action (CTA) is one of the most important parts of your ad. It tells your audience how to proceed next.

CTAs are important for guiding your audience in the right direction. Many leads will like what they see in your ad and want to take the next step. Without a CTA, your audience won’t know how to take the next step.

With PPC ads, you’ll want to integrate an engaging CTA on your landing page. This will help you capture more valuable leads for your business.

It’s important that you make your CTA detailed. Don’t just say “click here” and expect your audience to be excited about it. “Click here” doesn’t tell them anything about what will happen if they click the button, nor does it entice them to want to click.

A CTA like “Download your free gift voucher” tells your audience exactly what happens if they click on the button. Someone who wants to get a free gift from your company is enticed to click on that button and get their voucher.

With social media campaigns, you’ll want to include a CTA, too. Many social media platforms will offer a selection of CTAs for your campaign. You’ll want to choose a CTA that is most relevant to your campaign.

For example, if you’re trying to get people to sign up for your email list, a CTA like “click here” or “join us” doesn’t fit your campaign. Instead, you’d want to use a CTA that includes the phrase “Sign up today” or “Join our mailing list” because these are relevant to the action you want your audience to take.

By choosing the right CTA, you’ll encourage engagement with your ad. You’ll get more people in your audience to act. Not only will it help you garner more leads and conversions, but it will also lower your CPC because of the high engagement level.