What Is CPC?
CPC stands for “Cost Per Click.” It is a metric used in online advertising to measure the average cost paid by an advertiser for each click on their ad. In marketing, CPC refers to the amount of money an advertiser pays each time a user clicks on their advertisement. This model is commonly used in pay-per-click (PPC) advertising campaigns, where advertisers bid on keywords or ad placements and are charged a certain amount for each click their ad receives.
How Does CPC Work?
Here’s how CPC works:
- Advertisers Bid on Keywords: Advertisers participating in PPC auctions bid on specific keywords or phrases they want to target with their ads. These keywords are relevant to their products or services and are often used by users when searching for information online.
- Ad Placement: Search engines and advertising platforms, such as Google Ads, Facebook Ads, or Bing Ads, determine ad placement based on factors like bid amount, ad quality, and relevance to the user’s search query or browsing behavior.
- Auction Process: When a user enters a search query or visits a webpage, the advertising platform conducts an auction to determine which ads to display. The auction considers factors like bid amount and ad quality score.
- Determining Ad Rank: Advertisers’ bids and ad quality scores (determined by ad relevance, landing page experience, and expected click-through rate) contribute to their ad rank, determining the ad’s position on the search results page or webpage.
- Cost Calculation: The actual cost per click an advertiser pays is determined by the next highest bidder’s bid amount and ad quality score, divided by the advertiser’s quality score plus $0.01 (or the minimum bid increment). This ensures that advertisers pay a fair price relative to the quality and relevance of their ads.
- Ad Display: Ads are displayed to users based on their search queries, browsing behavior, demographics, and other targeting criteria set by advertisers.
- Charging Advertisers: Advertisers are charged each time a user clicks on their ad. The amount charged equals the bid amount required to beat the next highest bidder’s ad rank up to the maximum bid set by the advertiser.
Overall, CPC allows advertisers to pay only when users interact with their ads by clicking on them, making it a cost-effective and performance-driven advertising model.
Check out some other terms you may encounter in the Creator economy here.
