CPC (Cost per Click)

What does CPC mean?

The abbreviation CPC means Cost per Click. PPC (Pay per Click) is also used as a synonym.

What is CPC?

CPC is a payment model or billing method that is common in online marketing. It describes the billing per click on a booked advertising medium. This can be display, video or search ads. The focus is on purchasing users or influencing their consumption behavior. It is important to note that the CPC does not include a flat rate, but is charged on a performance basis. You can consider the amount to be paid as a commission for the publisher.

How is the CPC calculated?

With CPC, the price is determined by the principle of the highest bidder. A limited number of advertising spaces are available. The better the CPC bid, the better the advertising space. Thereby you should know: Advertising spaces have different prices. For example, an ad above the organic search ads is more expensive than an ad below. A measurable size is necessary for bidding.

To illustrate, here’s an example:

An advertiser places search ads. In one day, 100 users click on the ad. A cost per click of €1.50 has been set. The total CPC is therefore €150.

How high is the actual CPC?

The advertiser sets his maximum CPC that he is willing to spend for a click. However, this often does not correspond to the actual CPC. This is because it is only as high as the limit value for the ad rank. In addition to the CPC, the following factors also determine the ad rank:

• Ad quality
• Relevance of keywords
• Quality of the landing page
• Number of competitors

To illustrate, here’s an example:

Five advertisers compete for four ad slots above the organic search results. The advertisers’ ad ranks are 60, 52, 30, 15, and 9 as follows. If at least an ad rank of 50 is required for search ads to be played above the search results, only the first two advertisers are eligible. The CPC of the advertiser with the ad rank of 60 must be just high enough to outperform the advertiser with the ad rank of 52. The CPC of the latter must be just high enough to exceed the minimum rank of 50. So you can imagine this a bit like a bidding process.

What are the advantages of CPC?

A click is required to estimate the CPC. Compared to cost per mille, impressions play no role in the calculation. In this way, the advertiser can ensure that his advertising material is really noticed. By setting maximum CPC, unwanted costs can also be avoided. CPC promise good calculability with the help of web analysis tools. Nevertheless, it is very important that you regularly evaluate the CPC and thus check whether the clicks actually lead to user actions on the landing page.

Does the CPC also have disadvantages?

However, with all the laurels for the CPC method, one disadvantage should not be ignored. Click fraud can be generated and the advertisers can be betrayed. In addition, if a user clicks the ad several times, the costs are billed more than once. This means that the advertising budget made available is used up more quickly. Although Google takes vehement action against these cases and takes invalid clicks into account in the calculation, it cannot guarantee that click fraud will be detected 100%.

Where is the CPC used?

The cost-per-click billing model is used in Google Ads. There, it is used both in the display network and in search engine marketing to determine costs. The CPC is also used for paid social ads on Facebook, Instagram, and other sites.

What is the auto-optimized CPC?

Advertisers have the option to activate the auto-optimized CPC function. Here, the advertiser sets a daily advertising budget. Google then automatically adjusts the maximum CPC for each possible ad delivery to maximize the click-through rate. Bids are increased when a conversion becomes more likely. Conversely, the maximum CPC is lowered when a conversion becomes less likely.

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