Cost Per Click (CPC) Explained: What It Is & Why It Matters

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Cost Per Click (CPC) Explained: What It Is & Why It Matters

What Is Cost Per Click (CPC)?

Cost per click (CPC) is a metric that measures how much an advertiser pays each time someone clicks on their ad. And it’s one of the most important metrics in online advertising.

Why?

Because CPC affects your return on investment (ROI).

It’s a key indicator of how well your ads are performing. And how much money you’re making from them.

In this article, we’ll cover:

Let’s get started.

Note: To quickly learn how to find a keyword’s cost per click, go here

How CPC Works

CPC marketing falls under the pay-per-click (PPC) advertising model—popular among platforms such as Google, Facebook, Amazon, etc.

It uses a bidding system. You bid on keywords that are relevant to your product or service.

Then, when someone searches for those keywords on Google, for example, your ad shows up on the results page.

Like this:

Google results page for "web development class" showing an ad for Barkly Coding Boot Camp

But you, the advertiser, haven’t paid anything yet. You pay only when someone clicks on your ad and visits your page.

And the amount you pay per click depends on your bid amount, ad quality score, and competition.

To get the most out of CPC, you need to choose the right keywords, write compelling ads, and optimize your landing pages.

Let’s first cover how to calculate your cost per click.

How to Calculate Cost Per Click

Cost per click is calculated by dividing the total cost of an ad by the total number of clicks.

The CPC formula looks like this:

Cost per click = total ad cost / total number of clicks 

an image by Semrush illustrating CPC formula

For example, if you spent $100 on a PPC campaign and got 500 clicks, your CPC would be 20 cents.

Like this:

$100 / 500 = 20 cents 

How to Find a Keyword’s Cost Per Click

There are a few ways to find a keyword’s average cost per click. Here are several tools that can help:

Semrush

You can find a keyword’s CPC with Keyword Overview.

TipCreate a free Semrush account (no credit card needed) to follow along. 

Start by entering your keyword and clicking “Search.”

"hiking shoes" search in Keyword Overview tool

You’ll see the keyword’s CPC in the table labeled “CPC.”

table labeled “CPC” showing keyword’s cost of $0.72

That’s the average price advertisers pay for a user to click on an ad triggered by the keyword in Google Ads.

If, on the other hand, you’re conducting keyword research, the Keyword Magic Tool will also show each keyword’s average CPC in the “CPC” column.

Like so:

“CPC” column highlighted in Keyword Magic Tool results for "hiking shoes" keywords

Google Keyword Planner

Google Keyword Planner is a free keyword research tool for search campaigns.

It tracks and collects data directly from Google Ads. And it’s a great place to find a keyword’s average cost per click.

First, open the tool and click “Discover new keywords.”

“Discover new keywords” section highlighted in Google Keyword Planner

You’ll see a form with two options: “Start with keywords” or “Start with a website.”

Stay on the “Start with keywords” tab, enter the keyword, and click “Get results.”

“Start with keywords” tab in Google Keyword Planner

You’ll see a table with the keyword you provided and a list of related keyword ideas.

a table with "hiking shoes" keyword and a list of related keyword ideas in Google Keyword Planner

And you’ll find each keyword’s CPC under two columns on the table’s right-hand side:

Google Keyword Planner shows two columns with top of page bid (low range and high range)

Here’s what each column means:

  • Top of page bid (low range): The lowest someone has historically paid to get to the top of the results page.
  • Top of page bid (high range): The most someone has historically paid to get to the top of the results page.

The average CPC for each keyword may vary.

But you can use the ranges to see how much you’d (roughly) need to bid for your ad to appear at the top of the search engine results pages (SERPs).

How to Lower CPC

Here are a few tips to help you lower your cost per click and make the most of your campaigns.

1. Improve Your Quality Score

Google’s Quality Score is a metric of how well your ad compares with other advertisers.

It’s measured at the keyword level on a scale from 1-10. And looks at three components from historical data:

  1. Expected CTR: The likelihood that someone will click on your ad
  2. Relevance: How closely your ad matches a user’s search intent
  3. Landing page experience: How relevant your landing page is to users who click through

To find your Quality Score, click the “Keywords” drop-down, and then “Search keywords.”

navigation to “Search keywords” section 

Then, click the “Columns” icon.

“Columns” icon highlighted

And under “Modify columns for keywords,” open the “Quality score” section.

Select “Quality Score,” “Landing page exp.,” “Exp. CTR,” and “Ad relevance.”

“Quality score” section

And click “Apply.”

“Modify columns for keywords” section with "Apply" button highlighted

Now you’ll see columns for “Quality Score” and the other elements to help you see exactly what you need to fix.

Like so:

columns for “Quality Score” "Exp. CTR" "Landing page exp." and "Ad relevance"

Now, let’s look at how to improve Quality Score.

Make Your Ads More Relevant

The more relevant your ad, the more likely it will land in front of people interested in seeing it. And the more likely they will click on it.

One way to make your ads more relevant is to avoid broad ad groups that cover multiple keyword groupings.

Focus on creating several highly targeted ad groups.

For example, instead of having one ad group that targets “running shoes,” split it up. Have ad groups for:

  • “Waterproof running shoes”
  • “Running shoes for active women”
  • “Running shoes with wide toe boxes”

Each of those ad groups should target even more specific keywords.

For example, the “waterproof running shoes” ad group could target keywords such as “waterproof running shoes for winter” and “waterproof running shoes wide fit.”

You’ll likely create more ad groups (and more ads) this way.

But the trade-off is that your ads will be more relevant to the keywords you’re bidding on, which can help improve your Quality Score.

Improve Your Landing Page

The quality of your landing pages can have a big impact on your effectiveness and budget.

Here are a few landing page best practices that can help improve your Quality Score:

  • Be relevant. Visitors who click on your ad should be directed to a page related to what they searched for. If the page isn’t relevant, the user will likely leave.
  • Write clear copy. Write copy that clearly explains the purpose of your page.
  • Keep it simple. Don’t force users to click multiple links to find what they’re looking for.
  • Provide a good user experience. Keep your landing page accessible and consistent with your ad copy.

Pro tip: Once you’ve developed a solid landing page, use SplitSignal to test different elements like CTAs, headlines, and value propositions. To learn what resonates best with your audience.

SplitSignal lets you test different elements like CTAs, headlines, and value propositions

Improve Your CTR

A high CTR is a sign that your ad resonates with your audience—and it improves your Quality Score.

Here are a few strategies to improve your CTR:

  • Use assets to include additional information like call buttons, location information, and links to specific parts of your site within your ad
  • Use a CTA like “buy,” “order,” or “sign up” to entice users to click
  • Make ad text compelling by highlighting perks like free shipping or exclusive deals
  • Match user intent by writing copy that addresses the search query you’re targeting

2. Find & Bid on Long-Tail Keywords

Long-tail keywords are highly specific search queries. They tend to have relatively lower monthly search volumes than head terms and medium-tail keywords.

But they’re often easier to rank for, less expensive, and great at driving highly targeted traffic.

a graph illustrating search volumes and conversion rate for long-tail keywords

To find long-tail keywords, use the Keyword Magic Tool.

Enter the keyword you want to target and click “Search.”

search for "hiking shoes" in Keyword Magic Tool

Then, click “Advanced filters” and set “Word count” to two or three. And click “Apply.”

“Advanced filters” section in Keyword Magic Tool

That should pull up some long-tail keywords related to your target keyword.

Like this:

example of long-tail keywords related to "hiking shoes" in Keyword Magic tool

Add multiple long-tail keywords to relevant ad groups to see potentially significant increases in ad relevance (and lower CPCs).

3. Use Negative Keywords Effectively

Negative keywords are terms you exclude from search campaigns to prevent your ads from showing up when people search for them.

Implementing negative keywords can significantly reduce cost per click. You won’t be wasting your budget on irrelevant terms.

To find negative keywords, check your Google Ads Search Terms report.

Open your Google Ads account and go to “Insights and reports” and “Search terms.”

navigation to “Search terms” in Google Ads

You’ll see a list of keywords that trigger your ads.

example of a list of keywords that trigger your ads in Google Ads

Scroll through to find terms people search for that aren’t relevant to your campaign.

Check the box next to the keywords you’d like to add as negative keywords, and click “Add as negative keyword.”

navigation to “Add as negative keyword” in Google Ads

Then, you can choose to add them to an ad group, campaign, or negative keyword list.

“Add as negative keyword to” section offers "Ad group, Campaign and Negative keyword list" options

You can also use the Keyword Magic Tool to find negative keywords.

Enter your seed keyword and click “Search.”

"hiking shoes" search in Keyword Magic Tool

You’ll get a list of keyword ideas related to your seed keyword.

a list of keyword ideas related to "hiking shoes" in Keyword Magic Tool

Browse for any irrelevant keywords and add them to your negative keyword list.

Find Negative Keywords

with the Keyword Magic Tool: the Biggest Keyword Database on the Market

ADS illustration

4. Use Ad Scheduling

There’s more to bidding than just keywords. By using ad scheduling, you can do two things:

  1. Show ads at times of the day when customers are more likely to be online
  2. Adjust your bid during certain times of the day

This tactic will help you maintain and improve your average cost per click while driving more conversions.

To see which days and times are getting the best results, consult your “Day and Hour” performance on the “Ad schedule” page.

“Ad schedule” page helps you know which days and times are getting the best results

And schedule your ads accordingly.

To do that, click “Show more.” Then “Ad schedule.”

navigation to “Ad schedule” button 

Then, click the “pencil” icon and select the campaign to create an ad schedule for.

the “pencil” icon highlighted in the top left corner of "Ad schedule" page

Choose your specific days and times. And click “Save.”

choose specific days and time in the "Ad schedule" page

5. Use Geo-Targeting

You can also target specific countries, areas within a country, a radius around a location, or location groups.

Location groups could include places of interest or your business locations.

Apply bid adjustments to change bids based on the searcher’s location.

If an area has a lower conversion rate, you can adjust your strategy to maximize visibility where it makes sense.

To set up location targeting, click “Show more” and then “Locations.”

navigation to “Locations” button in the left-side menu

Then, click the blue “pencil” icon and enter the name of the location you’d like to target. And hit “Save.”

example of setting Boston as the location you’d like to target with your ads

Here’s Google’s guide on setting up different types of location targeting.

6. Use Different Keyword Match Types

Keyword match types control how closely the keyword needs to match the searcher’s query for it to trigger your ad.

Here are three match types:

  • Broad match: Ads can show on searches related to your keyword
  • Phrase match: Ads show on searches that include the meaning of your keyword
  • Exact match: Ads show on searches that have the same meaning or intent as your keyword
an image by Semrush explaining different keyword match types

The keyword match types dictate how closely the keyword needs to match the user’s search query so the ad can be considered for the auction.

For example, you could use broad match to show your ad to a wider variety of searchers. Or you could use exact match to target a more specific group.

So, what does this mean for your PPC campaign?

Well, exact match keywords tend to be more targeted (and relevant) but have higher CPC. And broad match keywords are less targeted (less relevant) but have lower CPC.

Use a healthy mix of every match type. And consistently optimize your campaign.

7. Use Device Adjustments

You can also manually increase or decrease your max CPC across mobile, tablet, and desktop devices.

Start by researching how your customers behave on each device through Google Ads.

For example, mobile devices may attract more clicks and impressions. But you may find that searchers are just browsing rather than converting.

To see how your ads are performing on different devices, go to “Insights & reports,” click “When & where ads showed,” and head to the “Devices” tab.

navigation to “Devices” tab in Google Ads

You can then set targeted bid adjustments by clicking the pencil icon in the “Bid adj.” column and setting your ads to target specific devices.

in the “Bid adj.” column in Google Ads you can set your ads to target specific devices

Uncover Your Competitors’ Ad Strategies

Now that you’ve learned all about CPC, it’s time to take it a step further.

That means taking an inside look at your competitors’ ad strategies. And learning from their strengths and weaknesses to optimize your own campaign.

You can easily do that with the Advertising Research tool.

Just enter a competitor’s domain and click “Search.”

enter a competitor’s domain in Advertising Research tool

The first screen will display the keywords your competitor is bidding on.

Along with each keyword’s ranking position in paid search, cost per click, and other helpful metrics.

Like this:

Advertising Research tool displays the keywords your competitor is bidding on

For an even deeper dive, head to the “Ads Copies” tab.

You’ll see the exact ads your competitor is running—including headlines, ad copy, CTAs, landing pages, and the keywords they’re targeting.

“Ads Copies” tab in Advertising Research tool shows the exact ads of your competitors

Click on the “Keywords” drop-down to open a table with the keywords that trigger the ad in search results.

C“Keywords” drop-down section opens a table with the keywords that trigger the ad in search results

Repeat these steps for all of your top competitors, gather insights, and pull ahead.

Uncover Your Competitors’s Ad Strategies

with the Advertising Research Tool

ADS illustration

CPC FAQs

What Is Maximum Cost Per Click?

Max CPC is the most you’re willing to pay per click. You set this in your Google Ads account.

When choosing your max CPC bid, choose the highest amount you think each click is worth. If someone clicks on your ad, you won’t pay more than your max CPC.

A higher bid generally helps your ad show in a higher ad position on the page.

But you generally only need to pay the minimum amount—as long as you beat competitors.

What Is Average Cost Per Click?

Average cost per click is the total cost of all your clicks divided by the total number of clicks.

Total cost of clicks / total number of clicks = avg. CPC

Let’s say your ad got two clicks: one click costs $1, and the other costs $3. Your total cost for both clicks is $4.

Divide $4 (your total cost) by 2 (your total number of clicks), and you get $2. In this case, your average CPC is $2.

$4 / 2 = $2

What Is Actual Cost Per Click?

Your actual CPC is the amount you’re ultimately charged for a click.

Typically, you’ll pay much less than your maximum cost per click bid. Because you only need to pay the minimum required amount to beat competitors immediately below you.

Here are two of the most important factors Google considers when evaluating ads:

Ad Rank is the score that decides where your ad appears on the SERP (or if it appears at all). This score is determined by factors such as bid amount, ad quality, competitiveness of an auction, and users’ search intent.

Quality Score lets you know how your ad compares with competitors’ CPC ads. A higher quality score (measured 1-10) means your ad and associated landing page are more helpful to users than your competitors’ ads.

Quality Score is determined by expected CTR, ad relevance, and landing page relevance.

an image by Semrush showing Quality Score as a sum of expected CTR, ad relevance and landing page relevance

So, if your ad meets the quality threshold and you’re bidding enough, you have a chance of appearing above competitors.

What Is Manual Cost Per Click?

Manual CPC bidding lets you set your maximum CPC for each ad you run and keyword you want to target.

Manual bidding is a great approach if you already know which keywords get more clicks and conversions. Manually set a higher budget for those keywords.

What Is Enhanced Cost Per Click?

Enhanced CPC (ECPC) lets you make the most of your manual CPC strategy by automatically adjusting manual bids if a click seems more likely to lead to a sale or conversion.

ECPC is a combination of manual bidding and Smart Bidding. Which is a bidding strategy that uses machine learning to optimize for conversions and conversion value.

ECPC uses browser, location, and time of day to adjust bids to get the best chance of a conversion for the best price.

In short, ECPC helps you get the best value for a conversion.

What Is Automated Bidding?

Automated bidding is a strategy that allows Google to automatically set bids based on how likely your ad will result in a click or conversion.

For example, Google can automatically set a higher budget for competitive keywords if you’re close to the top three slots.

Different types of automated bidding strategies help increase clicks, visibility, and conversions.

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