What is CPC in advertising: Cost per Click formula and calculation
By: Maryna Sharapa
Tags: Marketing, Advertising, CPC, Campaign

What is CPC in advertising: Cost per Click formula and calculation

How to get the most out of CPC advertising campaigns

On average, companies spend 7–10% of their income on advertising, particularly CPC advertising. If you set up your ad campaign correctly, it can attract a large number of leads in a short period.

What is CPC (Cost per Click), and how to calculate it?

CPC (cost per click) is a type of paid advertising where an advertiser pays for an ad click made by a user.

Calculation formula: CPC = ad cost/number of clicks

CPC-based ads: If you’re an advertiser, you pay for every click on your ad on another website that guides visitors to your website. For example, you place an ad banner on a popular website or run an ad on a search engine and social networks.

How does CPC advertising work?

There are two main models of CPC advertising: a fixed price per click and a price per click based on bidding. In a fixed-rate model, the advertiser and publisher negotiate a fixed price for each click in advance.

The most popular form is the price per click based on the bid. With this model, the advertiser sets the maximum price for a click he can afford. The higher your bid and the quality score of your landing page are, the more likely your ads will be shown to the audience.

By the way, the average click cost varies by industry and type of business, as it depends on the competition. For example, for companies that promote a product in law, insurance, or financial services, a click costs more because of the competition in these niches.

Each time an ad is shown, the system starts an internal auction and displays ads that have passed quality control and have a sufficiently higher bid.

Then your ad is displayed each time a user enters a keyword that matches your predefined keyword list. You don’t pay every time an ad is shown, only when the user clicks your ad.

If you prefer to use a banner CPC ad, the principle remains the same. Your ad is displayed, but you only pay when the user clicks on it. It’s an excellent way for companies to control their advertising budget and evaluate the reaction to their advertising campaigns.

How to get the most out of CPC and PPC advertising

Increasing the efficiency of a PPC campaign leads to:

CTR growth;

Lowering of price per click (PPC);

ROAS growth.

How can you increase the efficiency of PPC?

To reduce the price per click for your ads campaign, you should try to:

1. Make your ads relevant to your campaign and switch to manual bids. It helps you prioritize keywords that convert better.

2. Use remarketing and segmented lists.Keep those users who have already clicked on your ad. They become interested in your product, and with the help of remarketing, you can bring them directly to the purchase.

3. For maximum coverage, you should adjust bids based on location, devices, time periods.Every PPC advertiser focuses on lowering the price per click and increasing the number of people who view the ad, click on it, visit the landing page and convert — and you also have to track everything. Analyze, identify, and focus on what works best.

You should add UTM tags to your ad links and set up cost data import to see campaign information from different advertising services in Google Analytics reports.

After that, you can measure the effectiveness of different advertising channels by comparing their clicks, impressions, costs, CTR, CPC, and ROAS.

Image courtesy of the author

Also you can try cost data import from 15 advertising systems, including Facebook, Instagram, AdRoll, Trafmag, Bing Ads, Twitter Ads, Sklik, Outbrain, Yahoo Gemini, Hotline.

The article is originally published on OWOX BI blog