Cost Per Click (CPC) is an advertising payment model in which the advertiser pays only for clicks on their ad or banner. CPC is calculated as the total cost of the advertising campaign divided by the number of clicks on the ad. For example, if you spend $2000 on advertising and get 98 clicks, the cost per click will be $20.4. Several factors influence CPC, including:
- the frequency of search queries for which the ad is planned to be displayed — the popularity of the query among users increases the cost per click;
- the level of competition among advertisers — if many companies advertise for the same query, this leads to an increase in the price;
- the relevance of the ad — the advertisement should meet the requests of customers to get a high CTR, otherwise, the system will show the ad less frequently and charge more for it;
- the geography of the display — the advertising platform takes into account who you show the ad to and may increase the cost per click depending on the audience's payment ability;
Usually, the CPC model is used for contextual advertising and remarketing on Google, Instagram, Facebook, or other platforms. To do this, the advertiser prepares ad content, specifies the advertising budget and display period. For CPC, the user can set a maximum cost per click, which is the highest price the cost will not exceed but may be lower. Thus, they become a participant in the auction along with other advertisers. The system will choose an ad that offers the best price and meets quality content requirements.
If the user does not want to participate in the auction, they can specify a fixed cost per click. The advertiser should calculate the cost per click so that the budget is sufficient for the entire planned promotion period. Setting a high price can easily win against competitors in the auction, but such a strategy will not bring long-term success - the advertising will be too expensive and unprofitable, or the budget will quickly run out.
