Did you know that nearly $3 billion of ad spend is wasted annually?
And, if you don't optimize your ad spend, you will also likely see a huge waste in ad spend.
Cost per click (CPC) is one type of ad spend where you can easily lose a lot of money on wasted clicks or overpriced clicks if you have not optimized it. Reducing your CPC and optimizing your ad campaigns will help you reduce the amount you waste on ad spend.
We want you to get good returns on your investment. So, we put together this guide to help you understand how CPC works and how you can optimize it to lower your CPC.
Table of contents
What is cost per click?
Cost per click (CPC) is the amount that advertisers pay to the host, like Google, YouTube, or website owners, for every click they get on their pay-per-click ad campaign placed on the platform.
CPC vs. PPC vs. CPM
People often get confused between PPC, CPC, and CPM. So we'll show you the basic difference between them.
|Amount people pay for one click on their PPC ad campaign.||Advertising model where people pay every time someone clicks on their ad.||Amount people pay for 1,000 ad impressions on one webpage.|
If you seek to know more about the pay per click model, its benefits, and how to create it, check out our guide on the pay per click advertising model.
Related guide: What Is Cost Per Mile (CPM) and 5 Proven Ways to Reduce It
How does CPC work?
Now that all the clarifications are over, let's get into how CPC works. How CPC works can depend on the platform you are placing the ad on, like Google, websites, YouTube, Facebook, etc.
If you want to know the CPC for placing an ad directly on someone's website, you can directly contact the website owner and discuss your CPC.
If you want to place an ad on Google, things work differently. You can choose the keywords you want to compete for, and your ad will show up when someone searches it. Your CPC will depend on what keyword you rank for and its competition.
And with Google AdWords, you have to set how much maximum amount you are willing to pay for a click on your ad. Setting your CPC can be done manually, or you can enable enhanced cost per click to allocate your budget to get the most clicks automatically.
Facebook is different from Google because you won't show up based on search terms. You have to optimize your campaign to be able to reach your audience when they are scrolling through Facebook apps (Messenger, WhatsApp, and Facebook, of course).
Similarly, Instagram, Linked In, etc., have their own rules to estimate the CPC.
What is the average cost per click?
The average cost per click, as the name suggests, is the average amount people pay for every click on their PPC ad.
You can calculate the average CPC by dividing the total price of the clicks by the total no. of clicks.
Average CPC = total cost of clicks/total number of clicks
Overall, the average CPC is about $2, but it can widely vary based on the industry or the platform it's hosted on. Knowing the average CPC can help you roughly estimate how much it would cost you to run a PPC campaign on a platform for your industry.
For each platform
The average CPC for different types of platforms across all industries:
Google search: $2.39
Google display: $0.41
Google shopping: $0.58
As you can see, display ads are usually less costly than search ads. But unfortunately, they are less effective in bringing in good quality leads when compared to search ads.
For each industry
Now let's look at the average CPC for search as well as display ads of some different industries:
|Industry||Average CPC (Search)||Average CPC (Display)|
|Health & Medical||$2.62||$0.63|
|Travel & Hospitality||$1.53||$0.44|
How to calculate cost per click?
The way you can determine your CPC depends on the platform you use.
For social media and websites
If the social media platform or website does not provide the ability to set your max CPC amount, you can calculate the CPC using the following formula.
Cost per click = Total cost of the ad campaign/total number of clicks
If you are using Google AdWords, it uses a different formula to show you how much your CPC would be.
For google ads, your CPC is determined by the following factors
Maximum bid - the highest amount you are willing to pay for one click
Quality score - rating from 1-10 provided by Google based on users' experience on your landing page and ads
Ad rank of your competitor
Ad rank is evaluated by multiplying the maximum CPC with the quality score.
So the ad rank of your competitor is their maximum bid multiplied by their quality score.
And Google will calculate your CPC with the following formula:
CPC = [Ad rank of the ad below yours/your quality score ] + $0.01
For example, three people have bid to rank for a particular keyword.
|Name||Max. bid||Quality score||Ad rank||CPC|
|Mia||$2.00||10||20||16/10 + 0.01 = $1.61|
|Sam||$4.00||4||16||12/4 + 0.01 = $3.01|
|Roger||$6.00||2||12||8/2 + 0.01 = $4.01|
So, if you have a good quality score, you are more likely to win the bid without increasing your maximum bid.
How to lower your CPC?
After calculating your CPC, if you find that it is more than the average for your industry, it probably means you are not optimizing your PPC campaigns.
So here are different things you can do to lower your cost per click:
Improve landing page experience for quality score
Quality scores can vary greatly based on your CTR. So, you need to make sure that people who come to your landing page convert into customers. And a good quality score means lower CPC. So, optimize your landing pages to get more conversions.
Related guide: A Guide to Landing Page Optimization for Maximum Conversions
Use exclusions on your display ads
By default, display ads are shown on different websites and platforms. This is very expensive as you will have a lower return on ad spend (ROAS) as you might be shown on unrelated websites. So, you have to utilize exclusions and tell Google what types of websites you want to be shown in or not shown in. You'll only focus on related websites and save your money.
Reconsider your ad strategy
Look at your ad competition and determine if you should decrease or increase your ad bid to get a better ranking and more quality clicks aligned with your budget. Apart from the competitor analysis, you can also look at your keyword strategy.
You might usually eliminate keywords based on the price, don't do that. Instead, look at the search volume and search intent behind the keyword and choose accordingly. If the keyword has high volume and related search intent, it might give you better results even if it's more expensive.
A/B test your ad
Facebook uses machine learning to rank your ad and decide how, where, and when to show it. So, if it concludes that your ad copy or images won't get people to action, you will pay more for each click. So, run A/B tests on your ads to see which performs better for a lower CPC.
You can also A/B test your target audiences to see which of them respond better to your ads. This can be done easily for Google ads.
Use ad scheduling
Ad scheduling helps you control your advertising costs because you decide when your ads will show. The control on timing will help you show your ads at the exact time to get conversions.
Optimize your CPC today
And that's all you’ve got to do to reduce your CPC and increase your return on investment. If you want to try out other paid advertising avenues, check out our guide on email advertising. It goes over how you can advertise to reach potential customers via email and in the inbox.
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