What is CPC (Cost Per Click)?

One of the key concepts in contextual advertising is CPC (an abbreviation for Cost Per Click), which in English means cost per click on an advertising banner or ad placed on an Internet site. This indicator is a reflection of one of the most popular models of advertising campaigns in the network with payment for each targeted action performed by the user (PPC - Pay Per Click). We are talking about clicks on ads and subsequent transitions to the advertiser's website, service or landing (selling page).

CPC Effectiveness Factors

Today, in marketing, the click-through payment model is associated primarily with contextual advertising. Therefore, the effectiveness of using CPC is directly affected by the CTR (advertising click-through rate), the number of ad impressions and the quality of texts. And impressions and clicks, in turn, largely depend on such a factor as the placement of an ad unit. There may be three options.

Search ad. This is a classic way of displaying ads, in which the ad is placed directly in the search engine listing. With special placement, it is located above the search results, with guaranteed impressions it is at the end of the first page, and with dynamic placement it is on the second and subsequent pages. The maximum traffic (from 95%) comes from special placement and guaranteed impressions. Moreover, from 80 to 85% of visitors come from advertising placed at the top of the first page. These ads have a higher click-through rate, so the CPC model performs better in this case.

Advertising in the context-display network (CMS) of the search engine. In this case, an ad in a text and graphic format is shown on sites that correspond to the subject of the search query and the user's behavioral characteristics. Such ads have a lower click-through rate than those placed in the search results of Google and Yandex. Therefore, here it makes sense to choose the CPM (Cost Per Mille) pricing model - cost per thousand impressions. Unlike CPC, when advertising is paid for clicks on it, when choosing CPM, the advertiser pays for the promotion of his banner.

Remarketing. This way of displaying advertisements is similar to the previous one. Its main plus is the demonstration of advertising to those users who have an interest in the offer (they clicked on the banner, went to the advertiser's resource), but this did not lead to the target action (purchase, order or call). Remarketing uses several advertising models at once - along with CPC and CPM, the price is also determined per action (CPA - Cost Per Action).

How the CPC works

The model works quite simply. This way of interaction between the advertiser, the display network and the service for placing contextual advertising is most popular when it comes to text advertisements. The advertiser prepares the text for placement in the search engine results and determines the amount that he is willing to spend on an advertising campaign within a certain time. These ads are moderated by the service. and upon confirmation of their quality, advertising is launched. The number of impressions in response to user requests is determined by the auction, a special search engine algorithm. When a user clicks on an ad, a predetermined amount is deducted from the advertising budget.

Features of using CPC

Such a system works well when placing ads in search, but it is better not to use it in the display network. Site owners who provide banner ad space typically charge per thousand impressions, which is a CPM model. And only when it exhausts itself, there is a transition to pay per click. CPC depends on such factors: the level of competition of a certain niche for a search query, the region where the ad is shown, the features of the ad (CTR, relevance to the search phrase), the correspondence between the page and the ad, date and time.

Click cost management tools

• Limiting the cost of clicking on an ad or request.
• Determine the maximum and minimum spend for the entire campaign.
• Setting limits for the Yandex advertising network as a percentage of the cost per click.
• Differentiation of the price of the transition based on the time of day.
• Frequent updates of rates - every 15, 30, 45, 60 minutes.
• Optimization of contextual advertising, ensuring high-quality ad content and CTR control.
• Setting up advertising strategy settings to save ad position.

Differences between different advertising models

The main difference between CPC, CPM and CPA is the pricing method. The first method pays for clicks, the second involves setting a price per thousand impressions, and the last one pays for actions taken by users. Much has already been said about Cost Per Click. Let's consider other options.

CPM (Cost Per Mille)

This model is used in the media. As for Internet marketing, here this method is used to pay for advertising space on blogs, social networks, partner and other Internet sites. A teaser or banner is placed in a certain place on this platform, and every thousand ad impressions to visitors are paid.

Calculation formula:

Budget (ad spend) / Reach (number of views) x 1000 = CPM

CPA (Cost Per Action)

When using this model, actions taken by users on the advertising site are paid, that is, placing an order, buying, registering, calling, etc. This option is best suited for advertisers to work with partner sites and webmasters, since it allows you to get a specific result in the form of targeted actions of potential customers. But those who receive payment are not interested in such a scheme.

Formula:

Advertising budget / Number of targeted actions = CPA

CPC Calculation

Consider the algorithm for determining payment when using the Cost Per Click model.

Formula:

Advertising budget / Number of clicks = CPC

For clarity, consider an example. Let's say visitors clicked on ads on a partner site 500 times. At the same time, 10 thousand rubles were spent on the use of advertising space during the month. We substitute the numbers in the formula and get the cost of one click. It looks like this:

10000 / 500 = 20 rubles for each ad click.

The cheaper the click, the higher the effectiveness of the advertising channel. But it is important to keep in mind that the transition to the advertiser's page does not guarantee the completion of the target action. The CPC indicator only shows the intensity of attracting the target audience to visit the advertiser's website to get acquainted with its offer. Whether such users become customers depends on many different factors.

Features and limitations of CPC

Many metrics can be controlled with the Cost Per Click model, but not all.

What is monitored by CPC

• The maximum cost per click (the maximum amount that an advertiser can pay for a transition to his page).
• The position of the advertisement in the Display Network or search.
• The form of advertising demonstration and its content (text, banner, video).
• The landing page to which the user goes, its quality, content, prices for goods and services, services offered by the advertiser..
• Conversion and other performance indicators of the site that affect the effectiveness of investment.

What CPC Can't Monitor

• Algorithms for displaying ads by search engines.
• Traffic by keywords, number of ad impressions.
• Content of search auctions.
• The cost of entering a niche market with certain goods and services.

Rules for profitable work on CPC

To get the most out of using Cost Per Click, you need to follow three simple rules.

Formulate advertising campaign goals and priorities . It is especially important to determine what target audience is intended for advertising and what will be considered a positive result of its distribution. You should also orient yourself in the metrics, the analysis of which is necessary to control the campaign.

Carry out manual adjustment of advertising . Many sites offer automatic tools that make it easier to just create an ad, select a goal, and deposit funds. But this approach is ineffective, since the level of competition, the characteristics of the target audience and the advertiser's offers, regional and other important factors are not taken into account.

Develop a simple and clear structure. The structure of the campaign should be clear to marketers. They need to know how to monitor metrics and what settings to change.

conclusions

We looked at what the CPC advertising payment model is and how it works, figured out how it differs from other pricing options (CPA and CPM). In addition, our article describes the calculation of the Cost Per Click indicator and the most effective ways to place ads with pay per click.