What Is Cost Per Click (CPC)? Definition, Importance, and How to Calculate

What is cost per click (CPC)?

Cost per click (CPC) is a paid advertising metric that measures how much an advertiser pays for each click on their pay-per-click (PPC) ads. You can calculate CPC with a CPC calculator or the cost per click formula (Total cost of an ad / total clicks earned by that ad = average CPC).

Budgeting is a pretty important part of managing an advertising strategy. That’s why it’s essential to track cost-related metrics when you’re running a pay-per-click (PPC) advertising campaign.

In particular, you should be sure to track cost per click (CPC). This metric is one of the simplest ways to see how much you’re spending on your campaigns. But what exactly is CPC, and how does it benefit you? That’s what we’re going to answer on this page. In all, we’ll cover the following topics:

• What is CPC?
• Why is CPC important for businesses?
• What is the formula to calculate CPC?
• What factors determine your CPC?
• What is a good CPC for Google Ads?
• What is the average CPC for Google Ads?
• 3 ways to lower your CPC

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What is CPC?

CPC, or cost per click, is a pay-per-click bidding model where you pay every time someone clicks on your ad. More specifically, it’s a metric that measures how much you pay for each click, and it gets calculated every time the PPC auction runs.

Why is CPC important for businesses?

In advertising and marketing, CPC is vital because it helps you:

• Understand what you’re spending to earn clicks on your ads
• Compare how your ad campaigns perform against competitors
• Recognize which ads, ad groups, or campaigns deliver the best ROI

Essentially, your CPC can serve as a thermometer for gauging the performance of your ads and your ad strategy. If you have an inflated CPC, that means you probably have room for significant improvements, like improving your Quality Score or changing your ad targeting.

What is the formula to calculate CPC?

The cost of each individual click your ads receive will often be different. That’s because Google considers a variety of factors when it prices each click (which we’ll cover momentarily), and those factors may fluctuate between clicks.

For that reason, when we talk about CPC, we’re usually referring to the average cost of all those different clicks. To calculate your average CPC, you can use the simple formula below:

Total cost of an ad / total clicks earned by that ad = average CPC

Of course, if you don’t want to calculate this amount manually, you can use our free CPC calculator.

What factors determine your CPC?

As we mentioned a moment ago, the actual cost of each individual click is determined by the ad platform based on a variety of factors. So, what factors affect the cost of each click?

Well, it varies depending on whether you’re running your ads through Google or Bing, or through a social media site. Let’s look at some of the main factors that contribute to your CPC in each of those cases.

Google and Bing

Search engines like Google typically use the following factors to calculate your CPC:

Maximum bid

Your maximum bid is the amount you’re willing to pay each time someone clicks on your ad. Your actual CPC may be less than your maximum bid, but you need to set your maximum bid as your limit on how much you’re willing to pay to obtain leads.

Ad Rank

Your Ad Rank is a value that determines your ad’s position in relation to other ads. It’s based on your bid amount, auction-time ad quality, search context, and other factors.

Quality Score

Quality Score is how Google Ads rates your ad. It’s based on your CTR, keyword relevancy, and landing page quality. To improve your Quality Score, be sure to choose the right keywords and link your ads to useful landing pages.

Social media CPC

Social media networks like Facebook often use different factors to calculate your CPC. What those factors are depends on the social platform you’re using, but here are some of the most common social media ad CPC factors:

Bid amount

This factor is very similar to the one used in search engines. Like in Google, you have to set a maximum bid that specifies how much you’re willing to pay for a particular action.

However, on social media, clicks aren’t your only option. Some other actions you could choose include views and conversions. You choose one of those actions to base your bid on, and then set how much you want to spend each time someone completes that action.

Ad relevance

Ad relevance is exactly what it sounds like: A measure of how relevant your ad is to the users you’re targeting. Ideally, your ad will blend right into the type of content that your target audience already sees in their feeds.

Your ad relevance is determined by engagement and clicks on your ad. If you have a high engagement rate and earn many clicks, it will influence the cost of your social media ad. Social media sites like Facebook take this into account when determining your CPC.

Ad placement

Ads have different costs depending upon the placement you choose. For example, you may pick a newsfeed, sidebar, or mobile app placement. These affect your overall CPC.

Social platform

Each social media platform charges a different rate for advertising.

Check out the average CPC for social media networks below:

Audience

If multiple companies are competing for the same audience, it will increase the CPC because of the rise in competition and limited slots.

Time of day

If there are dozens of businesses competing to run ads at the same time to reach similar audiences, it will influence your CPC.

What is a good CPC for Google Ads?

To understand what makes a CPC “good”, it’s helpful to have some industry averages. Luckily, data is available for more than 10 industries, including business-to-business (B2B), ecommerce, and industrial services.

Browse the table below to learn more about CPC marketing costs in your sector:

What is the average CPC for Google Ads?

The average cost for a Google Ads CPC campaign is $1 to $2. If you’re advertising on the Google Display Network, the average CPC is less than $1. Meanwhile, the average CPC for the Google Search Network is $1 to $2.

3 ways to lower your CPC

If you want to see the best results with your campaign, you need to keep your CPC low. Here are three ways you can lower your CPC advertising costs.

1. Refine your audience

Your audience is a big factor that influences your CPC campaign for both PPC and social media ads. After all, you’re trying to target people who are interested in your products or services and get them to click on your ad. If you want to lower your CPC, refine your audience.

First and foremost, decide who you want to target with your ads. If you aren’t sure who to target, think about who is most likely to buy your products. What does your ideal customer look like?

Think about things like age, gender, occupation, marital status, buying habits, and hobbies. These all impact your audience’s decision to buy. Single females that are 25–35 years old that enjoy kayaking are going to have different desires than married men that are 50–65 years old and enjoy golfing.

By refining your audience, you get specific with who you are trying to reach. You don’t need to narrow your audience down to one specific group and only target that group. Your business can have multiple types of customers that are grouped together.

Take baby products, for instance. You may have a group of parents that you market to, but they aren’t the only people who buy baby products. This is where you’d have a separate group of aunts and uncles or grandparents that also buy baby products.

By refining your audience, you’ll target leads with more relevant content. It’ll help increase engagement with your ads, which will lower CPC.

2. Create relevant ads

It may seem obvious, but creating relevant ads is one of the most important things you can do to improve your CPC. Ad relevancy influences both PPC and social media ads.

With PPC, ad relevancy falls under Quality Score. It’s one of the contributing factors to impacting the Quality Score of your ad. Google looks at your keyword selection and your ad to see that your ad fits that keywords.

When you have a high Quality Score, you get a higher ad placement and reach more valuable leads. It also allows you to set a lower CPC because your ad is extremely relevant. This is how you can lower your CPC with PPC advertising.

As for social media ads, ad relevancy is a direct influencing factor of your CPC campaigns. Social media sites want to deliver the most relevant advertisements to the right audience. The more relevant your ad is to your audience, the lower the cost.

Creating relevant ad content will help you keep your CPC low. It will also help you drive better results for your campaign because you’ll be reaching your target audience with content that interests them.

3. Use a detailed call to action (CTA)

Your call to action (CTA) is one of the most important parts of your ad. It tells your audience how to proceed next.

CTAs are important for guiding your audience in the right direction. Many leads will like what they see in your ad and want to take the next step. Without a CTA, your audience won’t know how to take the next step.

With PPC ads, you’ll want to integrate an engaging CTA on your landing page. This will help you capture more valuable leads for your business.

It’s important that you make your CTA detailed. Don’t just say “click here” and expect your audience to be excited about it. “Click here” doesn’t tell them anything about what will happen if they click the button, nor does it entice them to click.

A CTA like “Download your free gift voucher,” on the other hand, tells your audience exactly what happens if they click on the button. Someone who wants to get a free gift from your company is enticed to click on that button and get their voucher.

With social media campaigns, you’ll want to include a CTA, too. Many social media platforms will offer a selection of CTAs for your campaign. You’ll want to choose a CTA that is most relevant to your campaign.

For example, if you’re trying to get people to sign up for your email list, a CTA like “click here” or “join us” doesn’t fit your campaign. Instead, you’d want to use a CTA that includes the phrase “Sign up today” or “Join our mailing list” because these are relevant to the action you want your audience to take.

By choosing the right CTA, you’ll encourage engagement with your ad. Not only will that help you garner more leads and conversions, but it will also lower your CPC because of the high engagement level.