Cost Per Click (CPC) And When To Use It: A Beginner’s Guide

Today ads occupy a large portion of online as well as offline world. Whether it is newspapers, billboards or online platforms, you can find ads everywhere. It is anticipated that by the end of 2032, the global advertising services market will have grown at a CAGR of 7.2% and will be worth $1 trillion. While traditional methods of offline advertising are quite simple, online advertising has many factors involved. Cost Per Click (CPC) is one such factor involved in online advertising.

Deciphering Cost Per Click and the way it works

Cost per click (CPC) is a digital metric that falls under Pay-per-click (PPC) marketing model. It measures the average cost an advertiser pays to the publisher every time someone clicks on their advertisement. The CPC calculates the price of showing users advertisements on social media sites, search engines, the Google Display Network, and other publishers. When deciding on bid strategies and conversion bid types to maximize clicks in relation to budget size and target keywords, CPC is a key consideration.

Your CPC can help you determine how effective your search advertising campaigns are, and if you are overpaying for any of your campaigns or not. You must bid on your target keywords if you want to appear on appropriate search engine results pages (SERPs). Your ad’s placement on the results page is influenced by your bid, among other factors. which has an impact on your clickthrough rate.

Cost per click is a popular method used by advertisers when running a campaign on a daily budget. The ad is automatically taken out of rotation on the website for the balance of the billing period once the advertiser’s budget is met.

How to calculate cost per click?

There are, basically, two perspectives when it comes to calculating cost per click: from the advertisers’ perspective and from the publishers’ perspective. Taking the advertisers’ perspective into consideration, CPC can be calculated by dividing the total PPC campaign’s cost by the total number of clicks it received.

CPC = Total cost of the PPC campaign/Total number of clicks it received

But, when it comes to the Publishers’ perspective, calculating CPC is whole new deal. To determine their CPC rates, some publishers and ad networks use click bidding. This implies that a computerized system constantly calculates costs based on supply and demand. The price will then change based on how many advertisers are concurrently competing for the same publisher’s ad space.

Some publishers use a different formula to calculate CPC. The most popular method for determining CPC is to multiply the cost per impression (CPI) by the click-through rate (%CTR).

CPC = Cost per impression/Click through rate

The actual CPC calculated for an ad campaign when using an advertising platform, however, is not a “stable” metric. Over time, it changes depending on the ads, campaigns, or ad groups.

When to use cost per click?

CPC is a crucial metric that can help you assess the financial performance of your paid search campaigns and estimate the cost of your advertising. Several CPC use cases are listed below:

• In order to determine your budget and CPC-based relative return on ad spend (ROAS).
• If you wish to prepare a budget-based plan and forecast the expected volume of traffic.
• If you want to know how your average CPC stacks up against the competition in the market.
• In order to calculate your relative ad strength.

How can you lower your cost per click?

To have as low a cost per click (CPC) as possible is a major concern for businesses using PPC ads. By doing this, you can make sure that your campaigns are affordable, which raises the crucial return on investment (ROI). Understanding the elements that may keep your CPC low is necessary. Here are some recommendations to get you off to a good start:

Use long-tail keywords

Low search volume keywords with a definite search intent are known as long tail keywords. The best way to reduce the CPC is to use long tail keywords because they typically have a higher Quality Score. The more competitive a keyword is, the higher the bid will be because more people will bid on it. Long tail keywords being precise and having a low search volume, are less likely to be the subject of pointless searches, saving you money on advertising.

Use negative keywords

Negative Keywords aid in reducing the CPC as well. They stop irrelevant search queries from triggering your ads, which can reduce your CTR, negatively impact your Quality Score and raise your CPC. They permit people who are searching for your ads and are interested in your goods or services to see your ads.

Maintain the Quality Score

The quality score is Google’s assessment of the relevance of your ads, landing page, and keywords. This may have a significant effect on both: where your ads appear and the cost of each click. Your potential ad rank will increase and your cost per click will decrease the higher your quality score is. Creating highly targeted ads that are more pertinent to the search queries will help you raise your quality score even more.

Make use of Ad Scheduling

Timing plays an important role when it comes to advertising. Displaying ads during those times of the day when customers are more likely to be online, gives your ad a better reach. Scheduling your ads not only helps you achieve that but also allow you to adjust your bid during certain times of the day. This information can be used to create a unique ad schedule. With more conversions coming from your budget, this strategy will assist you in maintaining and lowering your average CPC.

Optimize your landing page for better experience

Depending on your CTR, quality ratings can differ greatly. Therefore, you must ensure that visitors to your landing page become paying clients. A high-quality score also results in a lower CPC. Consequently, improve your landing pages to increase conversions.

Conclusion

One of the most effective marketing techniques for getting results right away is cost per click advertising. To get the best results, though, its execution must be flawless. Conversion to CPC need not be challenging. In fact, it’s one of the best online marketing techniques you can employ to start receiving payments for your website as soon as possible. In general, cost per click is a form of online marketing you should experiment with as soon as you can.