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What is CPC (Cost Per Click) in Digital Marketing: Pros And Cons

Cost Per Click (CPC) relates to the fees or cost for running digital advertisements. With CPC, brands do not pay a fixed amount for the advertisements they need instead they pay according to the number of clicks on their advertisement by the consumers. Further in this blog, I will be discussing how is CPC calculated, how can you decrease CPC, few examples of CPC, their advantages and disadvantages.

What is CPC (Cost Per Click) in Digital Marketing: Pros And Cons

CPC is a method of digital marketing in which the brands will pay a certain pre calculated amount every time a consumer or customer clicks on their advertisement.

You must be wondering how to decide CPC, well CPC is calculated by the following formula

CPC = Advertising Costs / Number of clicks

CPC model are typically used when brands have a specific budget which are generally a daily budget or monthly one.

For instance, let’s say a brand utilizes a network that charges $2 per click and the daily budget constraint is $4000, therefore your brand can get only 2000 clicks per day. Once your brand has achieved 2000 clicks, then the website your advertisement is on will remove your ad for the rest of the day.

Few types of ads which use Cost Per Click model are Image ads, Video ads, Text ads, Shopping ads and advertisements on social media platforms like Facebook, Instagram, LinkedIn and Twitter.

For lowering the CPC, brands should:

  1. Increase the relevance score and quality score- Few networks like Google and Bing provide very attractive discounts on CPC if the brand has high quality scores. Campaigns and brands with 6 or higher can get between 15 to 50 % off on their CPC. On contrary, campaigns or brands with 4 or lower quality score will have to pay more. One can improve their scores by being specific with the audience you desire to target, By putting more thought into the message and image you want to deliver, one can boost these scores.
  2. Improvement in advertisement quality and landing page quality- The quality is one thing which attracts a potential customer, so always try to improve the quality of your ads and landing page as it helps and provide a better impression and excites the consumers to stay.
  3. Keyword choosing and relevance with your brand- Keywords play a major role as the consumer usually searches the keyword and if you choose a keyword which isn’t proposing your work or irrelevant to the work you do then it’s a waste. If you feel the keywords you have used are not helping or performing as you desire then remove and use a better keyword.

The keywords you choose for your website and brand promotion play a vital role, and the traffic you get on your website will depend upon the keywords the consumer use for searching their requirements, so always make sure that the keyword is relevant to your line of work.

For instance, the brand Simplisafe generally uses a keyword “Home security systems”. This ad typically appears at the top because of the SEO strategies used by the brand. This also means that they have a high ad rank and good quality score. As it’s an easy and accurate keyword, it attracts a large number of people and gets around 43,000 clicks.

Another example can be of Dollar shave club, which has a keyword “Shave club”, which directly relates to the work this brand does and is more easy as its common, so whenever a consumer inputs this specific keyword, their advertisements come among the top ones. But this company also has a keyword “Dollar shave” which is quite specific and requires the consumer to know about Dollar shave club, hence it attracts one-fourth of the consumers attracted by the keyword “shave club”.

Different type of ads are illustrated below:

1. Google Ads

As Google is the most used search engine throughout the world, Its advertisements ranks at the top of the list. It prices can be slightly higher than other search engine platforms but so are the results.

Google allows the brands to place their ads on private websites and on search results or both. On a private site, Google gets a certain limited % of the CPC, whereas on search, they get the whole amount.

The following algorithm is used by Google ads for calculating CPC:

Actual CPC = Competitor’s Ad Rank / Your brand quality score

For instance, let’s suppose that your brand has a quality score of 7 and the competitor ad rank is 28, then according to the formula, your actual CPC will come out to be $4 but with a 7 quality score you will be getting a good discount on this $4 CPC.

CPC varies from industry to industry. Legal services industry has the highest CPC which is around $9 whereas real estate and travel industry has the lowest CPC which is around $1.40. CPC for Adwords in all type of industries is around $2.

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2. Bing Ads

After Google, Bing is the world’s second largest search engine with around 656 million searches per month. Native advertising used by Bing reaches over 250 million users per month. 

The cost of CPC at Bing is cheaper than that of Google and provides better flexibility in targeting, location and scheduling. Bing also give you the access to the entire Microsoft search network including AOL, Bing and Yahoo. Bing generally has older, richer and more intelligent audience.

The following algorithm is used by Bing ads for calculating CPC:

CPC = Your bid x Competitor’s Ad Rank / Your Ad Rank

For instance, you bid like $1 per piece, the competitors ad rank is 5 and your ad rank is 2, hence by using the above mentioned formula, Your calculate CPC would come out to be $2.5.

Here at Bing ads, Real Estate industry has the highest CPC of $2.88 whereas Accessories and Apparels have the least CPC of $0.91. Average CPC throughout all industries on Bing is $1.54.

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3. Facebook Ads

As we all know, Facebook is the world’s most popular social media network in the world. Over the years it has become the top place for running up CPC ads. You can sell products and services based on geographic and interests.

Facebook has a different way of calculating CPC. They do not consider quality scores or Ad ranks, instead they have an auction process. They generally focus on the advertisements targeted audience. Facebook checks relevance scores, here CPC is not fixed.

On Facebook, Financial advertisers have the highest CPC with $3.77, whereas Apparel industry has the lowest CPC of $0.45. The average CPC on Facebook is around $1.72.

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4. Native Ads

These are a unique type of advertisements which generally look like a part of blog or private website. The two most famous native ad networks are Outbrain and Taboola.

Goodle’s Adsense is another platform.

Here you have much greater control of your own CPC which requires your greater attention. Make sure that you keep your CPC as high as possible as you will generally underpay.

CPC for native ads ranges across $0.05 up to $5 depending on the competition and content available.

According to Outbrain, around 75 percent of visitors or viewers trusts native ads than ads found on any other social media platforms.

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Pros of CPC advertising:

  1. Maximum level of customization and personalization are available to brands looking for advertisements.
  2. CPC has an ability to target the desired audience successfully.
  3. Allows you to physically access and understand the effectiveness of the campaign with the help of charts, graph and statistics.
  4. Brand only pay the cost per click, rather than paying per exposure.
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Cons of CPC advertising:

  1. Learning the skills and utilizing them for running a campaign has become very difficult because of too many platforms. Managing and changing the requirements can be quite a task.
  2. Requires constant attention for making sure that the costs don’t add up rapidly.
  3. Requires time commitment for being successful.
  4. Not all clicks convert to the desired output, a lot of convincing has to be done post clicking.

In conclusion, always pay attention to your CPC and work hard to keep it as low as possible. As CPC is depending on the quality of your ads and landing page, try and improve your quality score and relevance score. Analyze your charts and statistics and improvise as necessary. Try and use the keyword which is common and easily known by the customer, as the keywords play a vital role in attracting consumers and showing them your website at top on the search engine platforms. Keep in mind that CPC and Return on Investments (ROI) have an inverse relationship between them, so lower the CPC, more will be the ROI you would be receiving.

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