On average, companies spend from 7% to 10% of their revenue on advertising, in particular on CPC advertising. With its help, you can attract a large number of leads in a short period of time. If you set up the advertising campaign correctly.
Here we will talk about how to get the most out of advertising campaigns.
What is CPC (Cost per Click) and how to calculate it?
CPC (cost per click) is the amount that an advertiser pays for a click on an ad made by a user.
Calculation formula: CPC = cost of advertising placement / number of clicks
CPC-based advertising: If you are an advertiser, you pay for each click on your ad on another website that directs visitors to your own website. For example, you place an advertising banner on a popular website or run an ad in a search engine and social networks.
How does CPC advertising work?
There are two main cpc advertising models: fixed CPC and bid-based CPC. In the fixed-rate model, the advertiser and the publisher agree in advance on a fixed price for each click.
The most popular form is the CPC based on the bid. With this model, the advertiser sets the maximum price per click that he can afford. Keep in mind that the higher your bid and quality indicator, the higher the probability that your ads will be shown to the audience often.
By the way, the average cost per click varies depending on the industry and type of business, as it depends on competition. For example, for companies that promote a product in the field of law, insurance or financial services, one click is more expensive due to competition in these niches.
Therefore, every time before the ad is shown, the system launches an internal auction and displays ads that have passed quality control and have a sufficiently high bid.
Your ad will then be displayed every time a user enters a keyword that matches your predefined list of keywords. You don’t pay every time an ad is shown, only when it is actually clicked on.
If you prefer to use banner cpc advertising, the principle remains the same. Your ad will be displayed, but you will only pay when the user clicks on it. This is a great way for companies to control their advertising budget and evaluate the response to their advertising campaigns.
CPC in contextual advertising
This model has found the most active application in contextual advertising, where ads are shown only to target users. Therefore, it makes sense for advertisers to pay not for impressions, but for each transition, since it is potentially conversion.
The CPC value in Google is compiled individually for each ad and depends on many different factors:
- site attendance;
- the subject of the advertised site and the level of competition in it;
- geography of impressions;
- quality and relevance of ads;
- the financial capabilities of the advertiser.
In contextual advertising, CPC is determined by the auction principle. Therefore, the more the advertiser is willing to pay per click, the more likely it is that his ad will be shown for a particular query.
Therefore, it follows that the main factor is competition. The more of it, the more expensive advertising costs. And vice versa. Some advertisers resort to the strategy of low-frequency queries to reduce CPC in AdWords. There is practically no competition for them, but there is also coverage. And in order to compensate for the latter, they expand the semantics to cover more queries. And the cost per click remains minimal at the same time.