Cost per click: What is CPC in Marketing?

Mobile advertising doesn’t lose momentum and keeps growing. According to Statista, it is expected that mobile ad spending will surpass $339 billion by 2023 and reach nearly $413B by 2024. Despite the fact that this mature market offers various ways of reaching your target audience via different ad methods, the cost per click (CPC) model remains one of the most popular and widely used.

In this article, we will answer multiple questions: from basic ‘What does CPC stand for?’ to’ What is CPC optimization baseline?’.

What is Cost Per Click?

First of all, let’s define CPC. Cost per click is a metric used in mobile marketing to indicate the price an app marketer pays every time a user clicks on their ad. 

The formula for calculating CPC varies depending on your perspective. 

If you are an advertiser, the cost per click is the number you get by dividing the total advertising cost of your campaign by the number of clicks it gave you.  

Some app publishers use another CPC formula taking the cost per impression (CPI) and dividing it by the percent click-through ratio (%CTR). 

From the perspective of ad networks, CPC rates are calculated with help of bidding processes (the automated system that identifies cost considering the current offer and demand ratio). Thus, you should always remember that the average cost per click calculated for your ad campaign is not the most stable metric and can fluctuate over time across advertising campaigns and ad groups.

Let’s examine factors that determine cost per click:

• Max bid – maximum price an app advertiser is ready to pay for one single click;
• Quality score – the metric that determines the actual relevancy of your ad based on click-through rate, keyword adequacy, and landing page quality;
• Ad rank – metric that determines if your ads will be shown and what place they’ll take in comparison with other ads. App marketers have limited control over their ad rank as along with such factors as bid amount and ad quality certain external factors are considered as well (user intent, behavior of potential client, or the context of their current search).

PPC vs CPC

Some people refer to the CPC model as pay per click (PPC). However, the CPC definition and PPC meaning are close but not identical. In a way, they represent different components of the same process. Within PPC campaigns, an app marketer pays based on the number of times visitors click on their displayed ad. That number of clicks becomes the basis for CPC formation. 

Thus, PPC is usually perceived as a paid ads method and one of the most common ad types while CPC is commonly used as a financial metric in the context of digital marketing campaigns. 

Originally, pay per click model became popular with the emergence of such ad giants as Google Ads (AdSense, Adwords) and Amazon Ads. Nowadays myriads of ad networks apply it as well.

What does CPC Mean and Why is It Important? 

Cost per click became one of the most characteristic mobile marketing metrics for a good reason. Above all, CPC meaning is hard to be overestimated as this model can boast decent cost-efficiency. Taking into consideration that an app marketer pays only when their ad was clicked on, this method ensures good value for money. It’s also easy to see if your campaigns perform well. A poor number of click-throughs is a sign a campaign should be stopped and reconsidered.

Indeed, clicks are a much better indicator of engagement than, let’s say, impressions within the CPM model. If your funnel is managed and optimized right, clicks are to be translated into installs without considerable losses. 

That said, clicks don’t guarantee further engagement and conversion which represents the most considerable drawback of the cost per click method (unlike CPA or CPS models when you pay for customer acquisition or sale respectively). Furthermore, your ad spend can accumulate really quickly jeopardizing CPC ads profitability and your income. So, don’t forget to keep track of analytics like campaigns’ conversions and daily CPC budgets.

Optimization of CPC Marketing Efforts 

Sure CPC optimization is an intricate process and it makes sense to dedicate time to a specialized course or coaching program to master it (for, example Google Ads Certification). However, here’s the general code of behavior to consider if you want to make the most of your cost per click campaigns.

1. Leverage your quality score as its improvement is bound to cut your CPC and ensure an additional budget for your campaigns. For example, the quality score of 6 or higher indicated in your Google Analytics account is the golden standard that may give you up to 50% discounts.

2. Be specific with the audience you aim at. However, don’t shy away from tests and experiments to refine your targeting. 

3. Regular keyword audit is a must. Excluding irrelevant keywords or the ones that failed to give the desired result gives you insurance against budget drains. 

4. Expand the reach of your campaigns by trying out new CPC advertising channels and geolocations. 

5. Setting your bids, focus on such parameters as locations, time periods, and platforms. Adjusting them properly can improve your quality score and cut your CPC.