What Is Cost Per Click (CPC)?
Cost per click (CPC) is an online advertising revenue model that websites use to bill advertisers based on the number of times visitors click on a display ad attached to their sites.
The primary alternative is the cost per mille (CPM) model, which charges 1,000 ad impressions—or views—of the display ad, regardless of whether or not a viewer clicks on the ad.
The cost-per-click model is also known as pay-per-click (PPC).
Understanding Cost Per Click (CPC)
Advertisers commonly use cost per click with a set daily budget for a campaign. When the advertiser’s budget is reached, the ad is automatically removed from the website’s rotation for the remainder of the billing period. For example, a website with a cost-per-click rate of $.10 would bill an advertiser $100 for 1,000 click-throughs.
How Much Does a Click Cost?
A click costs no more than you’re willing to pay through a bidding system. For example, you could bid a maximum of $1 per click on Google Ads. The system runs through algorithms that evaluate your ads and charges you no more than your bid. However, there are some caveats.
The Google Ads system applies discounts to advertisers with higher ad Quality Scores. This score is determined by the relevance of the ad and the advertiser’s content to the search terms used. You’ll also be dinged in the position of your ad the lower you bid, again adjusting for the other factors evaluated by the platform.
How Is Cost Per Click Calculated?
A formula may be used to determine the rate you pay per click. One of the most popular ways to calculate your CPC is:
Some publishers or platforms like Google Ads use a bidding process to set their rates. For instance, Google Ads asks you to select the maximum amount you’re willing to pay per click. Google’s platform then uses Ad Rank thresholds to determine the actual cost when your ad is clicked.
This means your cost varies up to your maximum because the platform ranks your bid, ad quality, position, user signals, search topics, and related auctions and sets the cost per click. You can even have Google automate the bids for you to increase your click-through.
The platform then positions your ad based on your maximum amount, with higher maximums achieving a higher placement on the page.