What is CPC (Cost Per Click)?

Cost per click, CPC for short, is a payment model commonly used in digital marketing. In it, advertisers pay for every click their banner ad receives. 

CPC is most commonly used on pay-per-click (PPC) advertising platforms like Google AdWords. 

The cost of your CPC advertising campaign is influenced by a couple of factors, including: 

• Your maximum bid. This refers to the maximum amount of money you’re willing to bid for the ad space, per each click the ad gets. Depending on your field, this could be anything from a couple of cents to a few dollars.
• Your ad’s quality score. Search engines use this metric to measure how relevant and high-quality your ad is, in relation to the ad’s keyword.
• Ad rank. How high your ad is ranking among the ad results influences the CPC price, too. Lower-ranking ads are cheaper, but won’t get as much good exposure.
• The overall number of clicks. Understandably, the final cost of your campaign will be calculated based on the total number of clicks your campaign gets. 

What is bidding in CPC advertising?

Cost per click advertising relies on search keywords and terms. These keywords determine when it’s appropriate to show your ad to a user who’s searching for something on search engines, or indicates that they like particular things on social media platforms. 

You’re not the only advertiser on the PPC platforms, and that’s why most platforms work on a keyword bidding principle. 

In this context, bidding for a keyword refers to the maximum amount of money you’re willing to pay per each click. You can determine your maximum bid manually, or allow the platform’s algorithms to do it for you instead. 

If you want to maximize the number of clicks, and haven’t got a tight budget, it might make sense to choose automatic bidding for your campaign. This way, the system will determine the best keywords for you and bid for

Or, if your campaign’s cost efficiency is important to you and you’d prefer having full control over your campaigns, it might be worth taking the time and manually bid for your CPC campaigns. 

Factors that determine cost per click

In general, the factors that determine the CPC amount vary depending on the advertising platform you’re using. 

Although you will be competing for the ad space against other advertisers in the form of bidding, it’s not just the price that you’re willing to pay per click that determines your actual CPC. 

Google AdWords

Google is probably the biggest search and display network for PPC advertising. The reason Google is so popular among marketers is that the campaigns can leverage the search traffic on particular keywords, similar to SEO. 

In fact, many advertisers combine their paid advertising strategy with their SEO strategy. 

The main factors that influence CPCs on Google AdWords platform are: 

• Budget. The amount that you can afford to bid on a particular keyword is taken into consideration when Google calculates your cost per click. 
• Quality Score. Since Google is a search engine, the relevance of the ad determines the quality of the ad. The better quality the platform considers your ad to be, the better your CPC will be. Things like the ad’s click-through rate, its relevance to the keywords and ad text, the quality of the landing page, as well as the historical performance of your Google account will all impact the overall quality score. 
• Competitor’s ranking for the keyword. The ranking of the other bidders, as well as the popularity of a keyword among the bidders, influence the total price of your CPC, too. 

All of these factors affect the actual CPC value, or the final amount that you will be charged per click. 

Your actual CPC can be calculated as: 

(Competitor ad rank / your quality score) + 0.1 = Actual CPC

This means that your CPC will never be more than your highest bid. 

Google’s bidding system is mainly influenced by your own and your competitor’s ad ranking, the maximum bid you’re willing to pay and the quality score of your ad and your Google account historically. 

Your average CPC, in turn, will be the average of your actual CPCs. It’s calculated by dividing the total cost of the clicks by the total amount of clicks. 

On average, the Google AdWords CPC across all industries is around $2.60 on the search network. 

Some industries, like legal ($6.75) and consumer services ($6.40), can expect much higher average CPC.

On the other hand, the CPC for sectors like charities and advocacy ($1.43) and eCommerce ($1.16), is well below the overall average. 

Social media PPC advertising

Running CPC campaigns on social media advertising platforms can produce great ROI for your marketing spend. 

Like with Google, there are some key factors that influence the CPC on your social media ads: 

• Bid amount. Your available budget plays a role in whether your ad will get a spot or not on the social media platform. Knowing the average bid amounts of your market overall will help understand what’s a high or a low bid. 
• Ad relevance. Social media platforms are renowned for their targeting possibilities. The better you can target your ad and show it to people who are already interested in your market or your business, the better your ad will perform. 

Social media companies want to provide a seamless experience to their users, so your CPC will skyrocket if your ad is deemed irrelevant.

• Ad placement. On social media, there are multiple positions for display ads: you can run your ad as part of the main newsfeed, have it visible only in the sidebar, or specifically show mobile ads only. 
• Social media platform. Each platform sets their own prices, so understanding which one works best for you could influence your overall CPC spend. 

For example, the average CPC on Facebook is between $1.60 and $1.70, but the cheapest industries average a CPC of around $0.50 (hospitality at $0.63 and apparel at $0.45). 

On the contrary, the most expensive CPC can be found in finance ($3.77) and consumer services ($3.08). It’s important to remember that the profit margins in finance are much higher than in the restaurant industry, so the CPC is always relative to the industry itself. 

It’s important to remember that the CPC can be affected by many things on social media platforms. 

Seasonality, the time of day and week, and the targeting applied (age, interests, geography, the total amount of users targeted) all play a role in social media ad campaigns, even if they aren’t directly affecting the cost per click. 

How to lower your average cost per click

Most entrepreneurs and companies are always on the lookout for ways to save money. There are a couple of strategies that can be used to lower the price or the overall CPC of an advertising campaign. 

Target keywords with low bids 

The more popular a keyword is, the more bids it will have, and the higher the bid amounts are. 

To lower your CPC spend, look for keywords that are still relevant to your field, but not too popular. 

Using manual bidding will help to have full control over the keywords you want to bid for. 

Use long-tail keywords 

The generic the keyword, the more competition you’ll be up against. 

Long-tail keywords are keywords with lower search volumes but which answer the search query better. 

Bidding for long-tail keywords tend to improve the quality of your ads since the chances of irrelevant clicks are much lower than with more generic keywords.

Aim for the top 5

You should aim for at least the 4th or 3rd position in the ad results. In order to make it to the top 5, your ad needs to be relevant for its keywords and its copy, and have a relevant landing page. 

The higher you’re able to rank, the more relevant your ad will be seen by the algorithms. The higher your position, the higher your ad’s quality score will be, which will translate into a lower overall cost per click. 

Use negative keywords

Negative keywords act as filters and help to boost the overall quality of your ad campaigns. 

Not showing your ad to particular keywords that you consider irrelevant helps to target those people who are actively searching for your product or service. 

You’ll get good quality clicks and your campaign’s quality will improve, lowering your overall CPC spend over time. 

Target by location

If you have data on where your potential customers are from, you should consider using geo-targeting on your CPC ads. 

Most platforms will allow you to apply multiple geo-targeting options to your campaigns, too. 

Showing your ads to the people who are more likely to become buyers will increase your quality score, and in time lower your average CPC. 

Schedule your ads 

Running your PPC ad campaigns at a particular time of the day can save you a fair bit on your average cost per click. 

If you already know when you get the best visitor response from display network campaigns, scheduling your ads to show at certain times is a sure way to save on your average CPC.