Cost Per Click by IT Advice

Short Definition:

The term "cost per click" (CPC) refers to a method of billing advertising costs, used primarily in online marketing. CPC is used to determine how much an advertiser is willing to pay when they choose a PPC (pay per click) compensation model.

Cost per Click

Detailed Definition:

On the web, advertisers have a choice of different payment models. Regarding PPC, the advertiser pays only when a user clicks on their advertisement (banner, ad, etc.). The CPC billing model is frequently used by search engine agencies (Google AdWords).

 

Advertiser's text ads and display ads are featured on targeted sites or on search results pages. These are usually disseminated to target groups. Each time an internet user clicks on the ad, the advertiser pays a certain predetermined amount. The overall cost of the campaign is calculated using the cost per click billing method.

 

Through its AdWords agency and the AdSense networks, Google is considered one of the most important advertising agencies in online marketing. Although the operation of AdWords is mainly based on auctions, the CPC billing model is mainly used.

 

How are the costs calculated?

The cost-per-click model of Google AdWords is based on a specific system: the locations dedicated to serving ads that benefit from better visibility are allocated to auctions. Advertisers participating in the auction by indicating the maximum amount they are willing to pay for a click on their ad. The higher the bid amount, the greater the chances of obtaining profitable advertising space.

 

To determine which advertiser will get the best ad placement, Google calculates a given value based on the amount of the offer, but also on other criteria. While a higher bid does improve the odds of success, the price the advertiser is willing to pay is not the only factor considered. The quality score of the ads, as well as the keywords used and the contextual environment in which the product is promoted, also influences the visibility of the ad spot.

 

According to the system implemented by Google, a click on an ad can never be more expensive than the maximum bid amount set by the advertiser. This means if the advertiser who placed the bid closest to the highest bid set a much lower amount, the cost can go down significantly. So, Google determines the actual cost per click based on the price ultimately paid by the advertiser.

 

What amount should I choose to place a CPC bid?

Google allows the advertiser to determine the maximum amount of their bids. However, it should be noted that the AdWords network uses other criteria to allocate its advertising spaces, which may vary depending on the type of advertising. Here are the criteria that are taken into account by Google for text ads positioned in search engine results pages ( SERPs ):

 

- the cost of the keyword may increase depending on the traffic it is likely to generate and the search volume.

 

- the quality score of the advertiser day a role on the site. This is determined on the basis of characteristics such as the quality and relevance of the ad and the added value of the landing page for the user.

How does the auctionwork?

The advertiser can submit a bid to Google manually or automatically. With automatic bidding, AdWords selects the best offer based on the budget determined by the advertiser. The latter must plan a maximum daily budget, then Google chooses the strategy that will generate the most clicks on the ad.

 

With manual bidding, the advertiser decides for themselves the maximum amount they will pay for a group of keywords or ads. Therefore, he retains control over his bids but will have to put more effort into determining the most advantageous bid.

 

Once the maximum bids have been submitted, Google allocates a given ad space to each advertiser, taking into account the actual CPC.

Alternatives to CPC

Here are some alternatives to the cost per click model:

 

-        Cost per acquisition (CPA): with the CPA model, advertisers pay for each conversion (or acquisition) induced by a click on their advertisement. The advertiser himself defines the nature of the conversion/acquisition. be a newsletter subscription, opening a user account, or purchasing from the online store. Similar billing models include CPL (cost per lead) inducing payment for each contact generated and the CPO (cost per order), where the advertiser pays for each order generated.

 

-        Cost Per Mile (CPM): The CPM model is based on the number of impressions, that is, the number of times an advertisement appears on a website. The advertiser pays as soon as his advertisement is displayed 1000 times on one or more sites. In this model, the fact that the user sees or clicks on the advertisement is not taken into account. Therefore, the CPM model cannot be used for serving AdWords or AdSense ads on search results pages or the Google Display Network.

 

-        Cost per view (CPV): billing for the CPV model is based on the number of views of the video formats. In this specific case, advertisers only pay based on the number of times the video has been viewed or when other actions have been taken, such as clicking a call to action or button.

 

CPC is the most used model on Google AdWords. This model offers more transparency since the advertiser only pays when the user clicks, thereby showing a certain interest in the offer or the proposed product. Unlike CPM billing, where the advertiser is never quite sure that the user has seen or read their ad, CPC clicks can be easily quantified.

However, CPC billing also has its drawbacks. For example, studies show that Internet users click on ads by mistake, especially on mobile, which generates unprofitable costs. On the other hand, sometimes AdWords ads are displayed directly above the search results on a page, and the user clicks on the paid ad, resulting in unnecessary cost. Finally, CPC billing presents another risk: users may voluntarily make repeated clicks on an ad, resulting in increased expenses for the advertiser. However, Google has deployed methods to control this phenomenon as much as possible and prevent advertisers from paying for bogus clicks.

 

 Conclusion

CPC is a pricing model commonly used in the online advertising industry characterized by click-billing. This model is mainly used by the Google AdWords network. Cost per click can be calculated through an auction process, in which the advertiser's status is assessed against various criteria. Advertisers can bid to place their text ads or advertisements, either in search results or on the Google Display Network AdWords is considered to be Google's main source of revenue and the CPC model is used by thousands of platforms to auction their most attractive ad spaces.