CPC stands for Cost Per Click and is the amount each click costs.
When selling ads on the basis of CPC, the payout sets off whenever the ad is clicked on. It is usually a good payment model for advertisers who use CPC with a set daily budget for a campaign. When the budget is reached, the ad automatically removes itself from the website’s rotation for the remainder of the billing cycle.
Using the CPC formula, advertisers can calculate the budget for displaying Text ads, Shopping ads, Twitter promoted tweets, Facebook ads, LinkedIn ads, etc.
How is Cost per Click Calculated?
There’s a simple formula to calculate cost per click.
Cost per Click = Amount Spent / Measured Clicks
Key Terms
Amount Spent: The total amount of money spent on any marketing activity
Measured Clicks: The total number of times a click occurred and was registered by the server
A high number of clicks means that the ad is getting attention from the customers. Advertisers can bid on ad placement on websites, and through this, each brand’s optimal CPC is determined. Advertisers can use platforms such as Google Ads for the bidding process that sets their rate. These platforms then use various factors such as Ad Rank, ad quality, position, search topics, related auctions, etc. to set the cost per click.
The Cost Per Click calculator above can help advertisers get a better understanding of their budget and plan their further campaigns.
CPC vs CPM:
CPC (Cost Per Click) - You pay when someone clicks on your ad. CPM (Cost Per Thousand Impressions) - You pay based on how many people see your ads. If your campaign generated 1,000 clicks at a $5 CPC, you would pay $5,000. Cost per “mille,” = 1,000 impressions.
Why Does Cost per Engagement Matter?
When using different ad pricing models, CPC can also be used to determine how much clicks have cost. In the beginning, paying for clicks can be cost-effective, but as your CTR improves, a CPM rate can be more cost-effective.
For example:
For Ad 1, on a CPC basis ($1 per click), 10,000 impressions and 40 clicks cost $40 (CPC=$1).
For Ad 2, if you are paying on a CPM basis ($3 per 1,000 impressions), your ad will cost you $30 (CPC=0.75) for 10,000 impressions.
The above example shows the same amount of impressions and clicks received by both campaigns. A CTR of 0.40% is quite effective for display advertising (but terrible for search).
Cost Per Click campaigns, however, cost more both in total and per click. Although you are paying three times as much for CPM as CPC - a reasonable ratio.
A higher CTR would make the CPM campaign even more profitable. CPC advertising is appropriate for beginners with low CTRs, but CPM advertising is more suitable for those with higher CTRs. Get started with our Cost Per Click Calculator.
