Cost Per Click (CPC)

Joran Hofman
April 3, 2021

What is Cost per Click?

Cost per click (CPC) refers to a billing method that websites utilize based on the number of times a visitor clicks on an ad. Normally CPC is used when advertisers have a set daily budget for their advertisements. When the advertiser's budget reaches its limit, the ads are removed from the rotation.

Which is the Importance of Cost per Click in Search Advertising?

Cost per Click (CPC) is very important in the Search Advertising field because it is a number that will determine the monetary success of a paid search campaign and how much the advertising service will cost.

The gains from the advertising, regardless if each action is being over or underpaid, will be determined by how much is being paid for each click and what type of quality has been found thanks to that investment.

Since the overall Return of Inversion (ROI) of the ad campaigns is determined by how much is being paid for each of the clicks and the quality and quantity of traffic the ads are attracting, it is paramount to think about cost per click in terms of both cost and value. It is important to identify and target clicks worth investing in, being both inexpensive and valuable as that will maximize the return of the inversion and overall gains.

How do you calculate Cost Per Click?

Cost per Click is a really important metric for marketers to know and understand to help them analyze the performance of their digital campaigns and other opportunities. The formula to calculate cost per click is pretty simple, being the cost to the advertiser divided by the number of clicks.

For example; If a campaign cost an advertiser $120 and they received 33 clicks, the CPC would be $3.636 (120/33 = 3.636). If a publisher is looking to lever a demand source to get a new revenue stream. Their inventory has a CPC of $3.63, it means that that publisher is in the high end of the spectrum, as it the CPC of most advertisements can range anywhere from $.01 – $4.00 on average. It is important to understand this metric to know if a campaign is working or not.

What is a good Cost Per Click?

Cost-per-click means the cost to the advertiser every time someone clicks on their ad. Most online ad platforms like google ads or Facebook cost per click require a target cost-per-click that new campaigns need to meet to be able to run.

This brings to mind the question that everyone in this field might’ve thought before “what is a good CPC?” And to be honest, a short answer would be “it varies.” Cost per click (CPC) has a wide range of acceptable CPC thanks to a variety of reasons. These reasons include the platform on which the ad is on, the type of advertising that is being used, the audience that is being targeted, the product or service being advertised, and the bidding strategy being utilized.

For most marketing businesses, a 5:1 return of interest-to-ad ratio is acceptable. This fact means that for every dollar spent in advertising, five dollars will be produced in revenue.

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