What is Cost per Click (CPC)?

Cost Per Click (CPC) is a metric used in online advertising that measures the amount an advertiser pays every time someone clicks on their ad. It is a key performance indicator in pay-per-click (PPC) marketing, a popular form of internet advertising.

CPC helps advertisers understand how much they are spending to get users to visit their website or perform a particular action. The 'cost' refers to the monetary amount spent to gain that click. A lower CPC is generally better as it signifies that cost efficient results are being achieved.

The final CPC that an advertiser pays is determined by several factors such as the competitiveness of the keyword or sector, the quality score of the ad, and the ad's position on the page.

As a crucial component of digital marketing campaigns, the Cost Per Click plays several vital roles. It directly correlates with the amount an advertiser pays for direct traffic to their website.

CPC is an essential tool for controlling advertising budgets. By understanding their CPC, businesses can make better decisions on their ad expenditure. If a specific keyword or campaign costs too much per click, an advertiser may decide it's better to target lower cost keywords or re-evaluate the campaign.

Furthermore, understanding CPC helps gauge campaign effectiveness. Lowering the cost per click while maintaining or increasing traffic volumes infers that a campaign is effective, providing more value for less cost.

For instance, suppose an advertiser runs a pay-per-click ad campaign on Google AdWords. They bid on the keyword 'Digital Marketing Courses.' The cost of each click averages $2. This $2 is the Cost per Click.

In another example, an e-commerce store utilizes Facebook Ads, aiming to increase traffic to a product landing page. They set a budget of $500, which results in 1250 clicks to their landing page, so the CPC is $0.40.

In a more competitive industry, such as insurance, a company might see their CPC increase significantly. If they bid on the keyword 'Insurance Quotes' and each click costs them $20, this is their CPC.