Stepping into the world of digital marketing can be a bit daunting for newcomers. The breadth of the internet’s reach combined with innovative marketing practices are enough to make most people feel overwhelmed, and as experts in the space, let’s say you don’t know what you don’t know - the full depth of what’s possible is truly astounding.
But nobody can become a master overnight (except perhaps you, of course), and a very important first step is getting familiar with some of the basic terms and practices. Cost-per-click (CPC) is one that will help provide a solid foundation to understand digital advertising and get you on to more advanced topics.
What is CPC, and why is it important? You’ve come to the right place; let’s get into it.
What is Cost-Per-Click Marketing?
CPC is a marketing metric, or form of measurement, that helps marketers understand how much advertisers pay for ads they place online. In the most simplistic terms, CPC is the expense incurred by an advertiser for every click that an advertisement receives.
This type of measurement is found all across the digital advertising world. From websites such as YouTube and Google to social media sites such as Facebook and Instagram, CPC can measure the cost of ads regardless of whether they are in video, picture, or text format.
CPC vs CPM vs PPC
Let’s clear the air a bit. Before you get confused with the slew of terms thrown at you from advertising services, hurdles of CPC, CTR, CPM, and PPC that will surely have you pulling out your hair and mumbling TL;DR (too long; didn’t read), here’s a quick overview of these other similar terms.
Cost-Per-Click (CPC): cost of an ad based on the actual number of clicks it receives.
Cost-Per-Mille (CPM): similar to CPC, but this is the cost based on the number of times an ad receives an impression or view (per 1,000 views), regardless of whether it is clicked on.
Click-Through-Rate (CTR): the rate of the number of clicks another page receives related to the original ad.
Pay-Per-Click (PPC): while CPC is the measurement of the cost per click, PPC is the same thing but is the name of the marketing system that entails companies paying per click on an ad.
How does Cost-Per-Click Marketing Work?
CPC marketing works with a website and an advertiser who wants to display ads on that website. A website will set its price for an ad placement (at the beginning or end of a video, for example), and advertisers specify the total dollar amount they are willing to spend on that ad placement.
The actual way this is carried out can vary in practice. Advertisers often submit a ‘bid’ for the maximum cost per click they are willing to pay in a given advertising campaign, and these bids from various advertisers set the going CPC rate.
As an example, an advertiser might bid $0.10/ click. If they have a $200 marketing budget for this campaign, and the website they want to advertise on selects their CPC bid for $0.10/ click, the brand should expect 2,000 clicks on their ad.
In essence, CPC is Advertising Campaign Cost / Number of Clicks
It gets slightly more complex because many websites, such as Google, ask for your maximum CPC bid amount, but that amount is not usually what you end up paying as an advertiser; you often pay less than that bid. This is because certain platforms will rank your bid with the actual advertisement, grading it with factors such as relevance, ad quality, search topics, user signals, positioning, and more.
Most websites use third parties to match them with advertisers, so the criteria that rate your advertisement may vary along with the overall method of pricing CPC with bidding or without bidding. The main platforms in this website-advertiser relationship are Google Adsense, Amazon Advertising, Meta Ads Manager, Infolinks, Media.net, and Bidvertiser, but there are many more. If you intend to market on a particular website, it's worthwhile to research what CPC platform manager they use and what criteria they use to organize pricing and ad quality ranking.
Why is Cost-Per-Click Marketing Important?
CPC marketing is important because it helps brands evaluate the effectiveness and reach of their marketing campaigns down to the penny. More broadly, CPC allows brands to tailor their advertising in a measurable and controllable way unlike ever before.
The goal of any brand marketer is to decrease their CPC as much as possible - spending the most optimized amount of money for the maximum amount of attention to their product is on page 1 of every college student’s Marketing 101 textbook.
If CPC is high, brand marketers know they should do a better job with the overall ad quality, relevance, and positioning of their ad. If CPC drops, it’s a good metric to show that marketing is on the right track.
What are the Advantages and Disadvantages of CPC Marketing?
CPC and CPM are the two primary ways of conducting web advertising (mentioned earlier).
CPC marketing benefits from a higher value. Your spending directly correlates to traffic driven to your website because people who click on your ad have some chance of becoming customers. On the other hand, CPC is more expensive than its CPM counterpart and usually has somewhat unpredictable rates depending on the website, time of year, and other factors.
CPM is much more straightforward cost-wise, but unfortunately, it does not guarantee any website traffic at all - it only guarantees that a set number of people will see your advertisement.
The CPC Verdict
As you enter the world of digital marketing, Cost-Per-Click will be among the most common metrics that drive decision-making for your company’s advertising. CPC marketing lets you understand exactly how your advertising money is spent and a concrete outcome regarding new traffic generated on your website.
This is only the tip of the iceberg, but as you prepare your next advertising campaign, you will have a good basis for managing marketing expenditures and your expectations for results. Optimizing your advertisements will help your company’s money go farther than ever, so continuing to educate yourself on best practices will undoubtedly benefit you in the long run.