What is Cost per Click?

What is Cost per Click?

CPC (cost per click) is a method that websites use to calculate a bill based on the number of times a visitor clicks on an advertisement. The alternative to CPC is CPM, cost per thousand. This refers to the number of impressions in thousands and does not take into account whether each viewer actually clicked on the advertisement or not.

CPC is the cost your business will pay to search engines like Google AdWords or Bing Ads for featuring your ads on their results pages. This means CPC is basically a search engine’s income. CPC is most commonly used when business marketers and advertisers have set a daily budget for advertisements.

When this budget is met, the ad is removed from the site or search engine results pages (SERPs) for the remainder of the billing period. When creating a marketing campaign, incorporating this method can lead to overall traffic to your business site increasing considerably. What’s more, CPC won’t ever waste your money.

You only have to pay for the advertisement if it gets clicks from potential customers. If your ad only receives impressions (views) but not clicks, you won’t have to make a payment. This is useful for reworking ads so that they’re more eye-catching and likely to garner clicks.

Why is Understanding CPC Important?

CPC is the amount that a website publisher will receive when a paid advertisement on the website is clicked. As business is increasingly done online, online ads are growing in popularity and frequency. Online advertising worldwide generated more than $150 billion in revenue. With this in mind, it makes sense that businesses should not only understand CPC, by also why it’s important for the future of business. Some reasons for understanding CPC include:

CPC is a Solid Measure of Success

CPC gives you an accurate measure of how well your marketing efforts are doing in the online world. For example, it allows you to determine whether you are paying too much for a single ad and not generating enough benefits. This information can help you change up your marketing strategy so that the quality and reach of your advertisement improve, as well as your overall return on investment.

CPC Determines Your Earning Power

In addition to measuring success, CPC also helps determine the earnings of your business overall. With this particular marketing method, you can effectively increase your site traffic. With more traffic coming in, your products or services have a higher chance of selling, earning your business more money over time.

CPC takes into account how important the right targeting is for reaching your intended audience. When ads are tailored to certain people based on certain keywords and keywords searches, it leads to better traffic.

CPC Gives You Control

CPC is an important technique because it gives you total control. You can start, stop, or pause your campaign at any time, which can come in handy if your budget gets a little behind your allotted time period. Having the flexibility to stop or pause your campaign when you need to allows you to improve your ads and other content for optimal results.

How is CPC Calculated?

CPC is determined using a fairly simple equation. To explain, let’s do an example to calculate your average CPC:
If a website has a CPC rate of 10 cents and provides your business with 5,000 click-throughs, the equation would look like this:

  • ($0.10 x 5000) = $500

How much you pay for a click is either set by a formula or through a bidding process. The formula used is the cost per impression (CPI), divided by percent click-through ratio (%CTR):

  • CPI / %CTR = CPC Rate

How Can CPC Be Improved?

There are two main ways that your CPC can be improved: by improving the quality score and expanding and refining your audience reach.

Improving Quality Score

Search engines such as Google have an automatic system that rewards advertisements that have higher quality scores with a lower CPC. If you can maintain a quality score of about 6, then you can expect a discount anywhere from 16% to 50%. If you have a quality score of 5 or lower, you end up paying a much higher cost for each of the clicks on your website. To keep your quality score nice and high, you can optimize ad content and your website content for SEO as well as create more relevant ads. This can lead to a better click-through rate.

Expanding and Refining Your Audience Reach

You can also improve CPC by expanding and refining the reach of your audience. Expanding your audience reach means finding new keywords to target a wider audience, which should result in more clicks and site traffic. Refining your reach looks like taking specific keywords into account that will only be shown to searchers who are more likely to convert. If you use Google Adwords, you have an option to include negative words in your marketing campaigns so that users are less likely to convert won’t see your ads at all.

CPC is an important marketing method that can lead to more money and customers in just a matter of time. To help this method along, however, your site has to be a strong landing-base for customers.

Directive is a leading PPC agency that finds low CPC opportunities to drive revenue and increase your ROI.

Get a custom proposal with us today to find out how we can boost revenue for your online business.

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