What is CPC or Cost Per Click?

In digital marketing, Cost per Click (CPC) refers to the amount of money an advertiser pays each time a user clicks on their online ad.

Simply put, in a CPC arrangement, advertisers pay according to the level of interaction or engagement. In this case, engagement is defined by clicks, rather than just paying for the advertisement to show up on websites or social media platforms (that would be CPM or Cost Per Mille).

How CPC works

Imagine you are online surfing when an advertisement for a fresh pair of shoes catches your attention. The advertiser of those sneakers pays a set amount to the site hosting the ad (like Google or Facebook) when you click on that ad to investigate further. The CPC is that number.

A fixed price model or, more frequently, a bidding method is used to decide the CPC value, which is not a fixed amount. The CPC is determined by the amount that advertisers are willing to pay per click in an auction, i.e., they compete to have their ads displayed to their target audience.

Image of a hand clicking a button and an explanation of the meaning of CPC
Image created by Market Business News.

Importance of CPC

Importance of CPS in advertising campaigns.

  • Budget management

CPC allows advertisers to have control over their budget, this ensures that they pay only for the people who engage with their ads.

  • Target Audience

Cost Per Click allows advertisers to specifically target specific consumers.

  • Measuring success

Cost Per Click provides a tangible metric to calculate the effectiveness and return on investment (ROI) of a digital advertising campaign.

  • Strategic Adjustment

Advertisers can optimize the efficiency and cost-effectiveness of their campaigns by regularly monitoring Cost Per Click and changing their advertising approach.

Factors influencing Cost Per Click

There are many factors that affect CPC, including:

  • Bid amount

The more an advertiser is willing to pay for a click, the higher the CPC will be.

  • Quality score

Platforms like google evaluate quality, relevance, and landing pages. Higher quality scores can result in lower CPC.

  • Competition

The CPC is typically higher in markets where there are plenty of marketers competing for the same keywords since there is more demand.

  • Targeting Options

Your CPC may vary depending on how general or specialized your target audience is.

Video – What is CPC (Cost Per Click)

Written by Nicolas Perez Diaz, October 7, 2023.