CPC in advertising
When launching an advertising campaign on the Internet, you always wonder which pricing model is best to choose. It is especially difficult to decide for novice advertisers or those who work with an offer that is completely new to them. In the meantime, many parameters in the campaign settings depend on this decision, as well as the results that can be expected from it.
In one of the previous articles, we have already discussed in detail how the CPM pricing model works. Now the CPC or “cost per click” method is next in line. Take note of the information below, so that each of your CPC campaigns brings maximum profit!
What is CPC? — Meaning and features
CPC is an abbreviation of “cost per click”. This parameter indicates how much each user’s click costs the advertiser. At the same time, the budget is not spent on impressions, if there were no clicks. The number of conversions or other target actions is also irrelevant for calculating the budget in this case.
Here's what every advertiser needs to know about the CPC pricing model:
— When you launch a CPC campaign, you get thousands of free impressions. The budget is spent only if the user clicks on the ad. During the rest of the time, the ads are still shown to website visitors. This will allow you to increase your brand awareness at no extra cost. And after a little time and a few impressions in a row, the probability of getting the desired clicks grows, as the product will look more familiar and understandable to the user.
— CPC campaigns bring more measurable ROI to advertisers than, for example, the CPM ones. You instantly know what works and what not after seeing the results expressed in the number of clicks in every case. Be sure to run the tests, so that it is easier to predict how many people will click on the ad during the actual campaign.
— Ads launched via the CPC pricing model collect a lot of data about the target audience which will be useful for improving your strategy while setting up future campaigns. Having gained experience running several ads, you will already know which creatives give more clicks, at what time of day people click more willingly, which offers, advertising formats and CTAs work better.
— Finally, as an advertiser, you also need to keep in mind that CPC can be not only a pricing model but also an additional parameter for evaluating the campaign if the payment is made by CPM or CPA.
When to choose CPC?
CPC is well suited for initial ad testing and target audience evaluation. If users don't click on the ad, you don't lose money anyway. At the same time, the audience can still remember the offer.
If the advertising is successful and the CTR number is high, this pricing model might become quite expensive soon. So consider using the other two, CPM and CPA, as well. This choice depends on each individual case. For example, if the campaign is aimed at getting conversions and shows good results on tests, you can safely transfer it to the CPA pricing model. In this case, the clicks might cost more, but the final profit is likely to be higher.
If the advertiser does not yet have a stable flow of conversions or a strict daily budget is allocated for the campaign, it will be more logical and appropriate to choose the CPC model for getting optimal results.
To calculate CPC, you usually need to know only two numbers: total advertising expenses and the total number of clicks. "Total advertising expenses" is the budget that will be spent on placing an advertisement on a website. And "total number of clicks” is, obviously, how many times the website visitors have clicked on your ad.
So the CPC formula is quite simple and looks as follows:
CPC = Total advertising expenses / Total number of clicks
There should be no difficulties with the calculations here. To make sure, let's try to calculate the CPC in practice with a specific example. Let's assume that an advertiser has a budget of $300 to launch a campaign to promote an offer. The amount was spent in 5 days and during this time, users on the Internet clicked on the ad 6000 times. Substituting all the necessary numbers in our formula, we get:
CPC = 300 / 6000 = 0.05
Thus, the CPC, in this case, is $ 0.05. Each click on an ad for this campaign will cost 5 cents.
What is a good CPC?
These questions are asked by many advertisers, especially beginners when they want to at least roughly calculate the budget for launching an ad campaign.
Unfortunately, it is impossible to name a number that would represent a good CPC. Why? The short answer is “it depends”.:
The cost per click can vary greatly because of many factors. These factors include the platform you are advertising on, the advertising you choose, the audience you are targeting, the product or service your offer represents and the level of competition in this vertical, and your bidding strategy at the auction.
Finally, when calculating a potentially good CPC for your campaign, it is important to consider the target ROI. It makes sense to calculate the maximum allowable CPC at which advertising will bring the planned revenue.
Why is my CPC so high?
The cheaper the click, the higher the ROI. This is a well-known and indisputable fact. That is why advertisers tend to lower their CPC. Some take the relatively simple route of not entering the auction during peak hours. In this case, there is a high probability that you will be able to get a lower CPC. However, it is difficult to say how well this will affect the effectiveness of the advertising campaign overall
We suggest turning to more fundamental and important things. Sometimes it is better to think a little deeper and first of all look at advertising through the eyes of a potential audience.
If the CPC is too high, you need to ask yourself a few questions:
— How clearly does the creative reflect the offer? You can optimize the settings as long as you want, but you should not underestimate the visual part of the campaign. Creativity is a big part of advertising success. It has to catch the eye and clearly demonstrate the product or service.
— Is the CTA (call to action) clear to the users? In other words, do they know what they will get by clicking on the picture that attracted their attention? Will the app download start or will the clothing sale page open? To make a person click, give them instructions that are as clear as possible.
— Perhaps it makes sense to try another ad format? Different formats and verticals combine with varying success. Run tests of different combinations, analyze the results, and use bundles that work as efficiently as possible for you.
And, of course, it is very important to put the right bids at the auction. Our recommended bids for CPC campaigns can be found in the traffic estimator on our Self-Service platform for advertisers. Go ahead now!