Cost Per Click (CPC) is one of the most important metrics for businesses in digital advertising and is a key indicator of how well your advertising strategy are performing by measuring the cost of clicks each time a potential customer engages with your ad.
CPC reveals how much an advertiser pays when someone clicks on their ad and helps calculate the return on investment (ROI) from these ads
Not sure why this matters and why it can affect your business? Well, continue reading… Let us break it down for you.
How CPC works
CPC, similar to the pay-per-click advertising model, uses a bidding system. Within this system, advertisers bid on keywords that are relevant to their product or service. When a search term matching those keywords is entered by your target audience, your ad appears on the search engine results page, competing for valuable advertising space.
At this point in time, the advertiser has not yet paid for any service. The actual cost is taken when the ad is clicked, and your page is viewed. It is calculated by dividing the total number of clicks by the total cost of an ad.
The cost per click is dependent on a number of factors, this includes: your ad's quality score, your bid amount and the competition. (CPC links to the number of competitors you are bidding against as well as how high they are willing to bid).
In order to get the most out of your CPC, it is important to write compelling ads, select the relevant keywords and optimise your landing pages to improve conversion rate.
Calculating Cost Per Click
CPC =Total Cost of Clicks/Total Number of Clicks
In other words, you’re dividing the total amount spent on clicks by the number of clicks you’ve received. It’s a simple calculation, but it can reveal a lot about how efficiently your budget is being used.
Let’s say you’re running a Google Ads campaign and have spent £100 on ads. Those ads received 50 clicks. To find your CPC, just plug the numbers into the formula:
CPC=£100/50=£2
So, in this case, your CPC is £2, meaning you’re paying £2 every time someone clicks on your ad. This is a helpful figure to know because it tells you how much each potential customer is costing you just to reach your website or landing page.
Average Cost Per Click
Now, you might wonder if £2 is a “good” CPC. That depends on a few things, including your industry. For instance, highly competitive fields like insurance or legal services can have average CPCs that are much higher, sometimes even over £10 per click. Meanwhile, industries with less competition often see lower CPCs, around £1 or less.
You can get an idea of average CPCs using tools like Google Keyword Planner or Ahrefs. These tools can show you industry benchmarks and help you set realistic budgets based on what others are paying for similar keywords.
Finding a Keyword’s Cost Per Click
Semrush and Google Keyword Planner offer tools that can help you find a keyword’s average cost per click.
Semrush:
Enter your keyword and click the “Search” button.
Look for the keyword’s CPC in the table labeled “CPC.”
This will show the average price that advertisers pay for users to click on the ad triggered by the keyword within Google Ads.
Google Keyword Planner:
Google Keyword Planner is a great place to find a keyword’s average cost per click as it tracks and collects data directly from Google Ads.
Click “Discover new keywords.”
Here you will find: “Start with keywords” or “Start with a website.”
Choose “Start with keywords” enter your keyword, and then choose “Get results.”
Here you will see the keyword you provided, a list of related keyword ideas and each keyword’s CPC. You can also see how much you would approximately need to bid for your ad to appear at the top of the search engine results pages.
Lowering your CPC
To make the most out of your campaigns, lowering your CPC will ensure that they are cost-effective and increase your return on investment. This can be achieved with the following tips:
Improving your quality score – This can be done by making your ads more relevant. Avoid broad ad groups with multiple keyword groupings, and focus on creating highly targeted ad groups. Improving your landing page is another focal point, this can be done through writing clear and relevant copy and providing a simple and effective user experience. Lastly, achieving a higher click-through rate through assets, call-to-actions and using compelling text, will resonate your ad with your audience and improve your quality score.
Negative Keywords – Implementing negative keywords can substantially reduce your cost per click. The terms you exclude from your search campaigns will ensure your ads do not show up when people search for them.
Ad Scheduling – Using ad scheduling means you are able to change your bid during different times of the day. You can also show your ads at times of the day when customers are most likely to be online.
Geo-Targeting – Adjust your targeting to specific location groups through countries, areas within a country or a radius around a location.
Keyword Match Types – With broad match types, your ads will show up on searches that relate to your keyword. Phrase match types will ensure your ads show up on searches which include your keyword meaning. Exact match will ensure your ads show up on searches that include the same meaning/intent as your keyword. Exact match keywords tend to be more targeted but have higher CPC, whereas broad match keywords are less targeted but they have lower CPC.
We hope you can now better understand why cost per click matters and how it can affect your business.
You can also read further on: Advanced strategies to lower your cost per click
Ad Formats and Their Impact on CPC
CPC isn’t just about keywords; the type of ad you choose also affects how much you’ll pay per click. Each format has its unique benefits, and understanding these can help you decide where to focus your budget for maximum impact.
Types of Ads
Here’s a quick look at the main types of ads and how they typically impact CPC:
Text Ads: These are the classic search ads you see on search engines like Google. Since they’re highly targeted, focusing on specific search terms, they can have a moderate-to-high CPC, especially in competitive industries. Text ads work well for reaching users who are actively searching for something specific.
Display Ads: Display ads are visual ads that appear across a network of websites. Since they reach a broader audience, they generally have a lower CPC compared to text ads. However, their click-through rates (CTR) are often lower as well. Display ads are great for brand awareness or retargeting campaigns, where reaching more people matters more than targeting specific search intent.
Video Ads: With platforms like YouTube, video ads can be a highly engaging format. Video ads tend to have a higher CPC due to their visual nature and potential for interaction. However, they’re effective for storytelling and engaging users who prefer video content, making them worth the investment for many brands.
Shopping Ads: These are often seen in e-commerce and allow users to view products directly in search results, complete with images and prices. Shopping ads tend to have a higher CPC but offer high-intent traffic. Since shoppers often have buying intent, these ads can lead to more conversions, making the higher CPC worthwhile.
Platform-Specific Considerations
Each advertising platform has its own strengths, which can impact both CPC and overall campaign effectiveness:
Google Ads: Known for high-quality traffic, Google Ads often has higher CPCs, especially for competitive keywords. But the platform offers a variety of ad formats, from search and shopping ads to display and video, making it versatile for almost any business goal.
LinkedIn Ads: CPC on LinkedIn can be higher, often due to its niche targeting. Since LinkedIn focuses on professionals, it’s ideal for B2B campaigns, particularly in sectors like technology, consulting, and recruitment. The higher CPC can pay off if you’re targeting a specific professional audience.
Amazon Ads: Amazon’s platform focuses on product ads, and CPC can vary depending on product demand and competition. Because shoppers on Amazon are typically in a buying mindset, CPC here can lead directly to sales, which justifies the cost for many e-commerce brands.
FAQS On Cost Per Click
What Is Maximum Cost Per Click?
Maximum Cost Per Click (Max CPC) is the highest amount an advertiser is willing to pay per click on their ad. It sets a cap on what you’ll pay for each click in a bidding system.
What is a Good Maximum Cost-Per-Click?
A good Max CPC depends on your industry, goals, and budget. Typically, a good Max CPC balances cost and conversion value; high enough to stay competitive but within your budget limits.
Why Does CPC Increase?
CPC increases due to factors like rising competition, higher bid amounts, lower Quality Scores, or targeting competitive keywords, all of which can drive up the cost per click.
What is The Difference Between CPC and CPM?
CPC (Cost Per Click) charges per click, while CPM (Cost Per Mille) charges per 1,000 ad impressions. CPC is ideal for traffic and revenue-focused goals, and CPM suits brand awareness campaigns.
Here at MIRA, we have a team of experts who are trained in cost per click with proven results. We want to help, just let us know how. Get in touch with us today, we’d love to chat.