Among online advertising metrics, CPC (Cost Per Click) is for you to know how much your paid ads cost you each time a user interacts with them: here's what it is and how you can calculate it.
Perhaps a somewhat awkward question: on a scale of 1 to 10, how much do you really understand about the world of paid advertising?
Whether you are as much or as little knowledgeable about web marketing, I guess sometimes the sponsored ads part (on any platform) seems a little hard for you to fully understand...
Or maybe it's a no-brainer for you to make them, but you've never delved more deeply into it.
Either way, the gist of the matter is this: although most small businesses now seem to do some form of online advertising, the so-called Pay Per Click (and, more specifically, the Cost Per Click) is still a concept that eludes many.
Still, it is an important skill to master-or at least to have a basic knowledge of.
Ps. If you missed my articles on Data Analysis e KPI I suggest you go and read them 😉
So if PPC and CPC are still somewhat obscure acronyms for you, you're in the right place: in this article you'll find all the definitions you need to learn more about these tools and to understand, above all, what cost per click is, what it's for and how you can calculate it.
What is CPC (Cost Per Click)?
You know when you do a Google search and you find sponsored ads at the top, above the organic search results?
There, that's pay-per-click (PPC) marketing, which is a way of advertising online where you pay to have your site appear in the top search results.
And Cost Per Click (CPC) falls right into this category.
But what exactly is it?
Suppose you want to run a paid ad on Google: Cost Per Click refers to how much you pay each time a user clicks on it.
So you need it to measure the cost of your ads - and it's clearly a metric that determines the return on investment and thus the success of your campaigns.
Pay-per-click advertising is most common on search engine results pages, such as Google, but it is also used on social channels (although CPM is more common). If done well, PPC can make you money lead Of quality.
Perhaps you are now asking yourself, however, what is the difference between PPC and CPC?
Actually, PPC and CPC describe the same thing: PPC is the system whereby you pay for every single click on an ad, whereas the CPC is the given used to measure such clicks.
Finally, Cost Per Click is a figure that applies to various types of advertising, from display ads to those that appear in search engine results and on social media, whether they contain text, images or video.
CPC: how is it calculated?
To figure out how much a single click on your ad costs you, you can use this very simple formula:
CPC = ad cost / number of clicks
So, if you spent €500 on your campaign and received 100 clicks, your CPC will be:
CPC = 500 / 100 = 5€
This information allows you to understand whether or not that campaign was effective and therefore whether or not changes to your promotional strategy are needed.
Easy, isn't it?
But there's more: you can actually analyze your advertising strategy with more specific CPC metrics.
Here are which ones:
Maximum cost per click
Maximum Cost Per Click is the maximum amount you are willing to pay per click. A higher bid generally allows your ad to be published in a higher position on the page.
Average cost per click
Average Cost Per Click is the total cost of all clicks divided by the total number of clicks.
Suppose your ad received two clicks: one costs 1€ and the other 3€ - so the total cost for both is 4€. Divide the latter by your ads and you have the average CPC: 4/2 = 2€.
Effective cost per click
The actual Cost Per Click is the amount you are charged for a click-usually less than the maximum CPC.
Manual cost per click
The manual Cost Per Click offer allows you to set the maximum CPC for each ad you run and for each keyword you wish to target.
Manual bidding is a great approach if you already know which keywords generate the most clicks and conversions -- for which you can set a higher budget.
Optimized cost per click
Optimized Cost Per Click allows you to get the most out of your strategy by automatically adjusting manual bidding if a click is more likely to generate a sale or conversion.
It is a combination of manual bidding and a strategy that uses machine learning to optimize conversions and their value.
Automatic bidding
Automated bidding is a strategy whereby you let Google automatically set bids based on the likelihood that your ad will generate a click or conversion, such as for competitive keywords, within your budget.
Google Ads use a bidding process to set your own rates and place your ad accordingly: to do so, consider several factors, including expected click-through rate and maximum CPC bid.
Google's platform then uses the ranking thresholds of the ad itself to determine the actual cost when it is clicked on.
Cost Per Click vs Cost Per Thousand
Among the digital marketing data you should monitor is CPM, or cost per thousand.
I have already devoted a blog article to it (you can find it here), but I will take this opportunity to reiterate what the difference is with Cost Per Click and what they can be useful for.
As just mentioned, the CPC is based on the number of actual clicks received by the ad.
CPC charges you only for the number of times a consumer clicks on your ads to get more information.
CPM, on the other hand, is based on the number of times an ad is simply viewed: specifically, it charges you for 1,000 impressions, or views, of it, whether or not the user clicks on it.
CPC is more directly related to purchases made by customers, while CPM could help you achieve the goal of increasing the brand awareness.
You can then use both data, considering the implications of each, to get a more complete view of the performance of your advertising campaigns.
Why is the CPC important?
I guess it is clear to you: knowing how much you are paying for your advertising and how effective your campaign is serves you well in evaluating the performance of your promotional strategy.
That's why CPC is an important figure to consider: your goal should be to reduce the price while trying to get high-quality clicks.
Monitoring CPC, specifically, allows you to:
- Direct traffic and attract more customers to your site by displaying ads where your target audience is likely to arrive most frequently;
- Improve your paid advertising campaigns by comparing their cost to revenue generated or other metrics;
- determine what types of ads to use, so if you feel the CPC is not profitable for some, you can shift your budget to others that generate more traffic;
- choose manual or automated bidding strategies: if you have a good understanding of your business, audience, and paid CPC advertising strategies, you can choose to automate your bidding strategies so that you can focus on other goals.
Conclusion
Well, now that you know what the CPC is and how it is calculated, you might ask yourself, what next?
Well, now you have to evaluate the quality of your campaigns.
Your goal, like that of all brands, should be to have a low CPC.
Which essentially means two things: optimizing ads and calculating your budget so you can deliver value and incentivize sales.
And you, do you already know what the CPC of your campaigns is?
Let me know in the comments!