Earlier I talked about CPA and CPO metrics. This time we will focus on the CPC model.
I will tell you what it is, how it works, where it is used and by what formula it is calculated.
What is CPC
CPC from English stands for cost per click, which literally means “cost per click”. It is one of the most popular payment models for advertising on the Internet. CPC allows you to determine the effectiveness of an advertisement by the following parameters:
Maximum bids per click.
Payback when placing a banner.
The optimal ad block format is photo, video or text.
Positions of contextual advertising in search engines.
The quality of the content in the ad.
How CPC advertising works
Two working CPC models – fixed and auction prices. In the first case, the cost of each click is agreed in advance between the advertiser and the advertising distributor. The second form of payment is the most popular, because in it the advertiser can set the minimum cost per click. At the same time, the average rate depends on the business area and the level of competition in the market.
In more detail: every time before the start of the display, an internal auction is launched in the system. At this stage, all ads are sorted according to the value set by the advertiser. The higher the bid and the better the advertisement, the more likely it will pass the control and be displayed in the desired position.
The ad is shown every time a user types in a search engine one of the keywords that the ad is associated with. At the same time, payment is not made for impressions, but for clicks on a link or clicking on a banner.
This indicator is influenced by the level of competition for the specified key queries and phrases, the characteristics of the ad, namely, its relevance to the request and CTR, the time and date of placement, as well as the correspondence of the landing page to the ad content.
Where is this model used
CPC is mainly used in contextual advertising, but this is not the end of it.
Contextual advertising in search engines. In this case, ads can be promoted in three ways: special placement, which ensures placement above all search results; guaranteed impressions under the search results on the first page; dynamic impressions on the second and subsequent pages. Most of the traffic, of course, is received by the first two options.
KMS (Google) and YAN (Yandex). Here you already create an advertisement on one of the specified systems, and the ad is displayed on sites that match your topic and key queries. In most cases, CPC does not play a special role in such a placement, and payment is made more for ad impressions than for actions. Accordingly, the CPM model is more often used here.
Remarketing. This method is similar to CCM and YAN, only it works a little differently. In remarketing, you attract those users who were previously interested in your company, products or services produced. Perhaps they have previously left orders with you, ordered a product, or followed links. Here, in addition to CPC, other models can be used, for example, CPM and CPA.
Pros and cons of CPC
The main advantage of this calculation model is that the ad or link is mainly clicked by interested users, respectively, the advertising budget in this scenario is spent efficiently, especially when comparing this model with CPM. But there is also a significant disadvantage – the fact that the user is interested does not mean that he will purchase your product or service. Plus, the cost of clicks is significantly higher compared to the same impressions.
You can accurately determine your target audience and collect more data about it by looking at the final statistics on the advertising campaign. This type of calculation also helps to assess how efficient a particular block is.
What is the difference between CPC, CPM and CPA
As we already understood, in the case of CPC, payment is made for clicks on a banner or link for the entire period of the advertising campaign.
CPA differs in that the fee is set for the completed target action, for example, adding an item to the cart, filling out a form, sending a request for a call, and so on. This model is used in many areas of marketing, but it is most often found in affiliate networks, Google Ads and Yandex.Direct platforms, as well as on social networks Facebook and Instagram.
CPM, on the other hand, involves payment for 1000 views. The model is aimed rather at shaping the image and informing the audience about the company or product. Plus it is one of the cheapest types of advertising. At the same time, it is ineffective for selling or performing targeted actions. Internet media, social networks, blogs, as well as partner sites offering banner placement are more often used according to this model.
How to calculate CPC
The formula for calculating the CPC indicator is as follows:
CPC = Расходы на рекламу/количество кликов
Here are a couple of examples.
You place contextual advertising in the Google search engine (for example, for guaranteed impressions) and set a budget of 20,000 rubles. As a result of the advertising campaign, 2,400 clicks were released. So, we undertake to calculate the cost of a click, and we have the following picture: CPC = 20,000 / 2,400 = 8.3 rubles (effective indicator, by the way).
Through YAN, the advertiser places a block on thematic sites, and it costs you 9,000 rubles. It is clicked 750 times. In this case, the CPC calculation will be like this: CPC = 9,000/750 = 12 rubles.
How to set up CPC ads
To get the most profitable advertising according to this model, you must adhere to several rules:
Research the market and set clear goals for your ad campaign. Try to pinpoint your target audience and carefully study your competitors’ strategy.
Identify ways to track your campaign’s performance. Namely – set the threshold at which a positive or negative result will be seen. That way you will be prepared for possible trouble, for example, if your ad is unsuccessful. At such moments, you can adjust some parameters, choose new tools, or completely abandon the chosen promotion method if it turned out to be ineffective.
Please configure manually. Yandex.Direct and Google Ads provide the ability to automatically configure. This is convenient, but in many cases it can be disadvantageous. Such a setting often does not take into account the geography of promotion, audience, competition, and product features. Try to set all the specified parameters yourself and do not rely on automation.
Use remarketing. Firstly, those people who have previously interacted with your company are quite willing to do it again and again, especially if you have an interesting proposal and a well-worded ad. Secondly, you will spend less time defining the audience and carefully setting up, because all the characteristics are already on hand.
Do not forget about the need to add UTM tags. With their help, in analytical services such as Google Analytics, you can get detailed information about traffic.
The cost of clicks can be managed in the following ways:
Limiting the cost of the transition for all keywords or ads. If desired, you can set a minimum and maximum threshold for spending for the entire advertising campaign.
Using the adjustment of the cost of the transition depending on the time of day.
Bids should be updated as often as possible, for example, once an hour, 45, 30 or 15 minutes.
Setting up the advertising platform strategy to keep the ad in the desired position for important key queries.
Optimization of contextual ads, tracking content quality and CTR. Remember that ad parameters can be changed during the placement of the ad unit. And if something goes wrong, you can immediately change certain parameters in the ad.
The CPC model is very popular, but in areas where competition is high, the cost per click can be too high. It will take a lot of effort to make a profit. Remember that the cost per click depends mainly on the characteristics of the ad – the correct selection of key phrases, the creation of attractive creatives, interesting texts, and much more are important here.
Experiment, tweak your ads, keep working with your ad, and you’ll get the most effective results!