Discover everything you need to know about Cost Per Click in digital marketing! Read on to find out exactly how CPC is calculated.
Definition:
Cost Per Click is the money that you pay for EACH click in your Pay-per-Click (PPC) campaign.
Google makes you bid on highly competitive keywords to get a good ranking on the first page of searches. The more competitive the keyword is, the more you have to pay for it because the bid goes up.
Why do you need to pay this money? Because you cannot draw in an organic crowd with extremely competitive keywords. Several other bigger sites are also vying for those top spots on the Google Search Page. This is why you need to pay Google to draw in customers to your site.
This is where the concept of CPC originates from. Every time someone clicks on your ad, Google makes money through the PPC campaign.
Now, this automatically raises a few questions:
- How is CPC calculated?
- Is there a way I can pay less for CPC?
Keep reading to find out the answers to all of those questions.
How Is CPC Calculated?
Unlike CTR, there is no set formula for Cost Per Click. The reason is simple. CPC depends on the bidding. You cannot predetermine how many competitors are going to bid. Or how high the bid is going to go up.
But CPC does depend on a few set factors. Let’s see what these are:
Maximum Bid:
This is the maximum amount of money that you’re willing to pay for people to click on your ad.
Your final CTC might not be this high because it will be mitigated by other factors.
Quality Score:
This one needs a bit of explanation.
Google doesn’t just hand over the highest ranks to the sites which pay them the most. Google’s RankBrain completely focuses on quality and relevance of the content.
Therefore, they have incentivized the creation of better quality ads and content. You need to pay less if you can assure Google that your content is of a superior quality. This is why Google assigns you a Quality Score.
The Quality Score itself is based on criteria like Click-Through rate of ads. And also the quality and relevance of your ad and landing page.
Take a look at the figure below.
CPC and CTR are two things that collectively determine how much you have to actually pay.
Ad Rank:
This one itself depends on a LOT of factors. So, let’s just get the information from the horse’s mouth.
This is what Google Ads Help has to say about the factors which determine Ad Rank:
“Ad Rank is calculated using your bid amount. . . . the Ad Rank thresholds, the competitiveness of an auction,the context of the person’s search (for example, the person’s location, device, time of search, the nature of the search terms, the other ads and search results that show on the page, and other user signals and attributes), and the expected impact of extensions and other ad formats.”
As you can understand, this is a mix of factors between what you can and cannot control.
Sure, you can control your bid amount but there is no way you can predict the competitiveness of the auction.
If you look closely at these factors you’ll realise that paying the most does not guarantee getting top rank. Therefore winning the bid is not the only thing that you should be focusing on.
In fact, if you want to pay less, you have to focus on the second factor. Especially since the third factor is mostly out of your control.
Besides Google Ads, Facebook and Youtube both have PPC campaigns as well. CPC advertising is an integral part of digital marketing. Knowing how much you should pay for your CPC is a piece of knowledge that ensures the maximum ROI. Hopefully this article gave you a deeper understanding of how CPC is calculated.
Do you invest on high CPC keywords? Or do you stay on the safe side with lower CPC keywords? Let us know in the comments below!
