Definition: Cost-per-click (CPC) is a digital marketing metric that measures the amount of money paid for each click in a pay-per-click (PPC) marketing campaign. Paid advertisements are a significant growth driver for many online businesses, making it essential to monitor cost-per-click and maintain a healthy ROI.

The pay-per-click model is used by online platforms such as Google AdWords and Facebook. Understanding the cost of these campaigns and tying them back to a specific goal, such as product sales, is vital to make marketing spend efficient. Each click in a PPC ad campaign also serves to indicate the attention paid by an individual who searches for the business's specific offerings.

Interpreting CPC Within the Context of Search Advertising

While important to measure, cost-per-click cannot be viewed in a vacuum. With cost-per-click identified, business leaders are better equipped to calculate return on investment (ROI). However, it must be noted that certain keywords with a high CPC produce a better ROI due to their heightened conversion rate. Once CPC is determined, executives can figure out if the organization is overspending or under-spending for specific online marketing efforts.

Cost-per-click should be analyzed in terms of value and cost. It's not enough to pay for clicks if they do not spur high-quality traffic. High-quality traffic is gauged through conversion rates and the average cost per acquisition. Focusing on identifying which clicks are valuable as well as cost-effective is essential to maximizing the value of PPC advertising.

The Auction Process

An auction process is performed for each search where a Google AdWords ad is eligible to appear. The auction process determines whether an ad will appear for a particular search and in which order it will show on the page if it does appear. The process works as follows:

1. The system finds all ads with keywords matching a search.

2. Those ads in this group that aren't eligible to appear due to geographic or other reasons are ignored.

3. Selection from the remaining ads occurs based on their Ad Rank, which is a combination of the bid, ad quality and projected impacts from extensions and other ad formats.

4. Even if your bid is lower than that of your competitors it may still win a higher position due to highly relevant keywords and ads.

5. Ad position will fluctuate due to variation in the competition for different keywords at any specific point in time.

How CPC is Determined

Figuring out how to lower the money spent on each click while maintaining or boosting the value of visits is a challenge for all businesses. Google's automated system provides pricing discounts for PPC campaigns that are properly managed.

  • Those with excellent quality scores (6 or higher) are given upwards of a 50 percent decrease in cost-per-click.
  • Businesses with accounts that have a quality score of 4 or below are punished with a higher CPC. This increase varies from a 25 percent cost-per-click boost to a 400 percent hike.
  • It's also prudent to optimize ads and landing pages to align with the prospective customer's actual search to improve Ad Rank.

Decreasing cost-per-click is not helpful if the business is already paying little for clicks, especially irrelevant clicks. A company should focus on boosting its quality score by using keywords that are directly related to the ad and landing page text. The goal is to obtain cost-effective clicks to subsequently decrease CPC. A minimal CPC directly relates to PPC success as it lowers the overall cost-per-conversion.

Learn more about monitoring CPC at the BigCommerce Support portal: Adding Google AdWords Conversion Tracking

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