CPC: what the cost per click is and how it is calculated
It is an almost literal example of an investment, of a payment that happens in exchange for a chance: to be precise, the chance to attract a potential customer to our site. Cost Per Click, or CPC, in fact measures how much an advertiser pays each time someone clicks on his or her ad and is an essential thermometer for those working in digital marketing, because it is a way to pay for online advertisements only when they are actually effective. Today we try to focus on one of the most important parameters of advertising campaigns, namely cost per click, trying to clarify what this expression means, how value is calculated and why it can serve to determine the effectiveness of work in search advertising and display advertising.
What is the CPC
Cost per click, often known as CPC, is the metric that indicates the amount actually spent by an advertiser to receive a single click on the ad and is a popular way of planning and purchasing online advertising.
Essentially, this parameter tells us how much we are paying for each visitor who clicks on one of our ads.
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This is an important parameter within Search Engine Marketing and the Pay per Click or PPC campaigns, or the type of advertising on digital platforms such as Google Ads or Facebook Ads, in which the advertiser pays a fee not based on the number of impressions (the quantitative data on advertising shown to users), but precisely the clicks made on the ad.
Pay-Per-Click (PPC) promotional investment thus takes click-through into consideration: the user not only views a sponsored banner or link and thus requests a link to the advertiser’s web page, but actually reaches the requested content and generates a site visit.
What the CPC is for
To avoid confusion between acronyms, while PPC is the advertising model or strategy we use, CPC is what we actually pay for each action (click) a user takes on our ad.
To put it more simply, those who choose this type of online advertising only pays when users click on the ad that appears in Google’s Serps or on Facebook and reach the page of the site. And so, in a broader sense, the CPC represents the cost of an investment to allow a potential client to visit our website, which therefore we must be able to “retain” and eventually lead to conversion.
Knowing the cost per click is crucial to compete in queries with highly transactional intent, where the user is already inclined to purchase: in these cases, in fact, it is likely that the value of the CPC is particularly high, because it is a keyword in sectors that have a market, where there are many investments and there is the possibility of economic return on investment.
The usefulness of CPC in digital marketing
The bidding system is the beating heart of digital advertising campaigns. The process begins with the selection of keywords that reflect what we offer, those that a user might type into Google when searching for products or services similar to what our site covers. It is, in short, the “paid” version of classic SEO keyword research.
Let’s imagine, for example, that someone searches for “SEO tool” and our ad for “SEOZoom” appears among the first results in SERP: it’s there, visible to potential interested parties, but the beauty is that so far it hasn’t cost us a penny. The payment occurs only at the moment when a user, intrigued by the ad, decides to click on it, thus landing on the landing page we set up.
It also follows that the amount we end up paying per click is not fixed, but is the result of an equation that takes into consideration how much we are willing to bid, how relevant and well done the ad is (the famous quality score), and how much others are competing for the same keywords.
Being able to optimize all these aspects means “intercepting” the 5 reasons that should convince us of the importance of calculating the CPC of our activities:
- Budgeting. The CPC helps advertisers determine how much they will spend on their advertising campaigns: knowing how much each click costs, they can set a daily or monthly budget so as not to exceed their planned spending.
- Performance evaluation. Calculating the CPC allows them to measure the effectiveness of ad campaigns: if the cost per click is too high compared to the return on investment (ROI), they may need to optimize ads or revise targeting.
- Campaign optimization. Knowing the CPC allows you to make comparisons between different keywords, ads, or campaigns to identify which elements are performing better and which need improvement.
- Bidding strategy. CPC is a key factor in bidding strategies: advertisers can decide to increase or decrease their bids for a click based on the value that click has for their business.
Competition. Having an idea of the average CPC in your industry can help you understand the level of competition and strategically position yourself in the market. - Profit. Calculating the CPC is essential to ensure that the cost of acquiring a customer does not exceed the profit that customer brings in, so as to support the long-term sustainability and success of any online business.
How cost per click is measured
By definition, then, the CPC indicates the unit cost incurred by the advertiser for each click generated by a paid ad and is, arithmetically, the ratio between two values, that is, the cost of the campaign and the number of clicks that generated.
This means that to calculate the cost per click we have to divide the cost of the advertising action by the number of clicks generated by the campaign. That is, the CPC is the result of dividing the total cost of the campaign by the number of clicks received. This tells us how much we are actually spending to capture the attention of a potential customer, allowing us to evaluate the efficiency of our advertising efforts.
However, we need to remember that the cost of the single click is variable – based on factors such as, for example, the quality score (the Quality Score used by Google), the ad extensions and the overall campaign optimization – and so you have to refer to its average value. More generally, CPC can be influenced by a number of variables that also depend on the advertising platform used, ad formats, market competitiveness, and marketing strategy.
For example, if there are many companies that want to appear for the same keywords, the cost of securing that click becomes higher. But it is not just a matter of who bids the most, because as mentioned, the quality of the ad also plays a key role: platforms such as Google Ads evaluate ads with a scoring system that rewards relevance and clarity. A well-crafted ad that answers users’ questions and directs them to an equally relevant page can get a cheaper CPC – to put it another way, refining ads and landing pages can be a way to reduce costs, because Google Ads’ Quality Score can influence the CPC, under the motto “quality pays off.”
Precision in targeting the right audience is another lever that can influence CPC: clearly defining who we intend to reach, where they are, what devices they use, and how they behave online can help reduce costs. And then there is the time factor: the time of day and days of the week when ads are shown can change the cost dynamic, following the rhythms at which audiences are most likely to browse and interact.
Market sector is another element that cannot be overlooked; some sectors, due to the nature of their products or services, see fiercer competition and therefore higher CPCs. And let’s not forget seasonality: events, holidays or times of the year can trigger fluctuations in costs, reflecting variable demand for certain items or services.
What the CPC formula is
Let’s get practical, because the CPC formula is disarming in its simplicity:
CPC = Total Ad Cost / Number of Clicks
To give an example, if the published ad receives three clicks – one cost €0.60, the other two €0.70 – the total cost of the campaign is €2.00: the CPC of that campaign is €0.66 and is easily derived by dividing the total cost by the number of clicks. If, on the other hand, we spend €100 and receive 20 clicks, our CPC will be €5.
Understanding the CPC formula is key to optimizing our strategies, but it is not the only data we need, as we will see.
What the average CPC is
In addition to the CPC, in fact, it is important to know the average cost per click or average CPC: this value gives us an idea of the average cost per click within a given group of ads or keywords.
The average cost per click formula is:
Average CPC = total cost of clicks/total number of clicks
i.e., total cost of all clicks divided by the total number of clicks.
The average CPC is a constantly changing indicator, influenced by variables such as market sector, competition, ad quality, and audience targeting. There is no universal value, but we can say that every industry has its own norm, and keeping up with these benchmarks is crucial so that you don’t find yourself navigating by sight.
The experts at Wordstream have in this regard done an interesting mapping of the average CPC worldwide, assuming that users look for different things in different states and that the average cost per click paid by advertisers varies by state.
Thus, if in the United States the average CPC is between $1 and $2 on the search network, we find that Italy has an average CPC 25% lower than the U.S. average; in Germany the value is 31% lower than in the U.S.; in the U.K. the difference is “only” 13%; Spain has an average CPC 50% lower than in the U.S.; and France as high as 64%.
Globally, the nation with the highest CPCs (and the only country to have a higher CPC than the United States) is the United Arab Emirates, where CPCs average 8 percent higher than in the United States. A rich and diversified economy-which relies on sectors such as finance and tourism, known for their high CPCs-likely helps put the country at the top of the list. Italy, however, is among the 10 countries with the most expensive average CPCs, along with Austria, Australia, Brazil, the United Kingdom, New Zealand, Chile, Switzerland, Italy, Canada and Germany: all of these states share strong economic ties with the United States, have experienced a surge in the economy, have very high English-speaking populations, or a combination of some combination of these variables, the study says. Moreover, in all of these countries Google acts almost like a search monopolist, with no significant competition from other search engines.
What the max CPC is
Speaking of the Google Ads system (and acronyms that can be confusing), it is worth remembering that with cost-per-click the advertiser pays only for the clicks actually received on his ads; in these campaigns it is possible to set a value of max CPC (or maximum cost per click), which equals the maximum amount we are willing to pay for a click on our ad (exclusion made for bid adjustment settings or use of optimized CPC).
To use Google’s words, the “CPC max represents the maximum amount you will be charged for a click, but you will often pay a lower amount, in some cases even much less,” because the Ads auction system works in such a way as to allow for just enough spending to outbid the immediately preceding competitor.
How to find the cost per click of a keyword
To find out (at least theoretically) how much it will cost us to click on a given keyword there are several methods, requiring the use of specialized tools such as Google Ads’ Keyword Planner or SEOZoom, which can offer us an estimate of CPC based on historical data, useful for getting an early view of what our necessary investment might be.
In particular, our software offers three different CPC estimation angles, based on the analysis of a domain in its entirety, a URL, or a single keyword, respectively.
In the latter case, the single keyword analysis presents us with the “Cost Per Click” figure, which is precisely the average CPC value estimated by SEOZoom based on historical Google Ads data. In addition, here we also find the “competion” data, a value always provided by Google Ads and ranging between 0 and 1, which precisely indicates the level of competitiveness present in Google Ads ads.
Starting instead with the analysis of any domain, we can read the figure for its “traffic value,” which is an estimate based on the calculation of the CPC of each individual page for which the site in question has keywords ranked on the first page on Google. Basically, it tells us in a nutshell how much we would have to invest approximately in Google Ads to get the same organic traffic as the site we are analyzing with SEOZoom.
Finally, with the analysis of a URL we get two different indications in the “ADS Coverage” field: Coverage is an estimate that sums the CPC of the keywords that the page has placed on the first page on Google, while Total CPC reports an overall figure of the CPC of all the keywords that are not currently on the first page (and are therefore between the eleventh and fiftieth positions on Google. These two values form precisely ADS Coverage, which is the gap, expressed as a percentage basis, between the CPC of the keywords that the URL has on the first page and the CPC of those for which it does not reach the top 10 on Google. This way we can get an idea of the value this page has and potentially could have, considering the CPCs of the various keywords.
Outside SEOZoom, and without considering other SEO tools, one method of obtaining CPC information is Google Keyword Planner, a free tool offered by Google Ads that helps advertisers discover new relevant keywords for their ad campaigns and obtain traffic estimates and historical data. Specifically, by entering terms related to our product or service, the tool will provide a list of related keywords, complete with useful metrics such as monthly search volume, competition level and, indeed, estimated CPC. For example, we can read the values for “Estimated bid for the top of the page” with the lowest and highest extremes, which tells us the lowest amount — and the conversely highest amount — a user has historically paid to get to the top of the results page.
These estimates are particularly valuable because they give us an idea of how much we can budget to pay per click on a given keyword. In addition, by examining historical data, we can get an idea of how the CPC and search volume for a keyword have evolved over time, to identify any trends or seasonal patterns.
To make the estimates more reflective of our business reality, we can refine the research by setting specific filters by language, geographic location, and search network to get more accurate and relevant data for the audience we wish to reach.
It is important to keep in mind that the figures provided by Google Keyword Planner are indicative-the actual CPC can fluctuate for a number of reasons-but having these initial estimates will help us plan our advertising budget more consciously and set up your PPC strategies with a stronger knowledge base.
Understanding the CPC to optimize marketing campaigns
Ultimately, CPC is a way to pay for online advertisements only when they are actually effective, and knowing the cost-per-click value is important because it can help us determine the financial success of our search advertising campaigns and understand how much the investment in ads.
The ROI of the PPC campaign will in fact be determined by how much we pay for the clicks and by the type of quality we are getting for that investment, that is the traffic they are leading to us: therefore, the CPC must be conceived both in terms of cost and investment of value, to be able to bring on our target pages a specific target ready to carry out the action that we set ourselves.
And while they may seem like two worlds apart, there is actually a correlation between CPC and SEO as well, which when understood (and used strategically) are two sides of the same coin, where the efficiency of one component fuels the success of the other: while CPC is about paid traffic, SEO focuses on organic traffic. However, an optimized SEO strategy can reduce CPC by improving the quality and relevance of content, and thus increasing the Quality Score of ads. In this way, we can achieve a better position in ads at a lower cost.
