Businesses spend more than $250 billion on search advertising every year, and this number will only increase in the future. More people than ever are shopping online, encouraging companies to increase their digital advertising budgets.
Among all advertising types, cost-per-click (CPC) or pay-per-click (PPC) is the most popular and effective.
Clearly, CPC advertising is a lucrative advertising channel, and every advertiser wants to explore it. If you're one of them, stay tuned. Here's a definitive guide to CPC strategy for beginners.
In this guide, we'll cover:
The basics of CPC advertising
CPC bidding and best bidding strategies
Top CPC advertising platforms
Top CPC metrics
CPC advertising best practices
Let's delve in.
What Is Cost Per Click (CPC) Advertising?
Cost per Click or CPC is an online advertising model where the advertiser pays the advertising platform for each click on the ad. It's also known as the pay-per-click (PPC) model, meaning essentially the same thing.
Let's understand the CPC model with an example. Suppose you're an eCommerce store selling custom t-shirts. You want to run ads on Google Search, and the keyword you want to target is "custom t-shirts." Google Ads allows you to check the highest CPC and lowest CPC for a particular keyword. For "custom t-shirts," the lowest CPC is $0.55, and the highest CPC is $3.52.
So, if you run an ad campaign with "custom t-shirts" as the keyword, you will need to pay between $0.55 and $3.52 every time a user clicks on your ad.
The CPC is unique to each keyword; however, certain industries have a higher CPC. Data from WordStream shows the average CPC for each industry.
However, CPC advertising isn't limited to Google. It's an essential aspect of any digital marketing strategy, and therefore, every advertising platform has a CPC model. This includes Amazon Ads, Facebook Ads, Instagram Ads, LinkedIn Ads, and so on. You can follow this guide to learn about the average CPC on major social media platforms.
How Does CPC Advertising Work?
Once you have identified your target keyword, you need to enter an "ad auction" and bid for the keyword. Now, what's the need for bidding?
Suppose you find a high-volume keyword, like custom t-shirts, as discussed earlier. You aren't the only custom t-shirt seller on the internet. There will be hundreds or even more of them, and all of them will want to target the same high-volume keyword. The advertising platform overcomes this hurdle by conducting an auction.
Multiple advertisers place their bids on a keyword. Each auction has a timeline, and only the bids placed during that time are considered. Once the auction time is over, the advertiser with the highest bid wins the spot. Here, your bid amount will be the CPC you will pay for the ad.
However, the CPC for a keyword isn't the highest bid. Different ad platforms use different methods to calculate the actual CPC. For Amazon Ads, the actual CPC is the second-highest bid plus $0.01. So, if the second-highest bid is $2.3 and the highest bid is $2.5, the actual CPC will be $2.3 + $0.1 = $2.4.
Some other factors may also affect the actual CPC. These include:
Competitiveness of the auction
Ad Rank thresholds
Impact of other ad formats and extensions
Context of the search
Types of CPC Bidding
Bidding is one of the most critical aspects of CPC advertising. The success or failure of a PPC campaign relies significantly on the bid strategy. Therefore, advertisers need to develop a robust bid strategy that helps them target the best keywords at a reasonable cost.
Keyword bidding is of two types: manual and automated. Let's quickly discuss the two approaches.
Manual bidding is a bidding approach in which an advertiser manually manages their bids on an advertising platform. They monitor their PPC performance and take action based on their analysis, understanding, and experience. Manual bidding is slow and requires a lot of involvement and patience. On the upside, it is more cost-effective than automated bidding.
You should opt for manual bidding if:
You have a small budget.
You have a limited amount of customer data.
You want greater control over your campaigns.
You have the time and patience to monitor your campaigns.
Manual bidding also allows you to change your campaigns in real-time and react to market trends and insights quickly. Hence, advertisers who want better control and quick implementation can choose manual bidding.
Automated bidding or smart bidding is an AI-enabled keyword bidding method in which the advertising platform uses algorithms to place and manage bids based on your advertising budget and campaign objectives.
You can take a more laid back approach when you choose automated bidding, as the platform takes care of everything. You don't need to spend a lot of time and energy overseeing your ad campaigns.
You should choose automated bidding if:
You have a large ad spend budget.
You have extensive historical data.
You have fixed goals.
You don't have the time and/or resources for manual bidding.
Some key benefits of automated bidding include accurate prediction, efficiency gains, and versatile segmentation.
Overall, no bidding strategy is better than the other. Both manual and automated bidding have their pros and cons, and you need to choose a strategy based on your objectives, resources, and requirements.
Automatic CPC Bidding Strategies and When to Use Them
Automated PPC bidding is further divided into various types based on your digital advertising goals. You can optimise your bids for maximising clicks, maximising conversions, and more. Let's look at different bidding strategies, when to use them, and which ad platforms support those strategies.
This CPC bidding strategy adjusts bids to maximise conversions within your allocated budget. It uses advanced algorithms to analyse historical and real-time data, allowing you to achieve higher conversion rates. This strategy is ideal for businesses seeking to maximise their conversions without strict cost-per-conversion constraints.
Target Cost-Per-Action (CPA) bidding helps you achieve a specific cost per conversion. By setting a target CPA, the system balances cost and conversion rate. This strategy is suitable for advertisers who have a clear understanding of their desired cost per conversion and want to maintain that level.
Maximise Conversion Value
This strategy focuses on maximising total conversion value within your budget. It optimises bids based on potential revenue from each conversion, prioritising placements with higher returns. Businesses aiming to increase their return on investment and optimise for revenue should consider this strategy.
Target Return on Ad Spend (ROAS) bidding sets bids to achieve a specified ROAS, adjusting them based on predicted conversion values. This is an ideal strategy for businesses that have a specific return on ad spend goal and want to ensure their ad spend yields the desired ROI.
Target Impression Share
This bidding strategy secures a specific percentage of eligible impressions for your ads, increasing visibility in competitive auctions. Businesses aiming to improve brand awareness or maintain a dominant online presence should consider using this strategy.
Designed to generate the highest number of clicks within your budget, this bidding strategy optimises click-through rates. This approach is ideal for businesses looking to boost website traffic or increase brand exposure, particularly when the primary goal is not conversions.
These flexible bid strategies offer control over individual ad placement bids. Manual CPC allows you to set maximum bids for each ad, while Enhanced CPC adjusts your bids based on conversion likelihood. These strategies are suitable for advertisers who want more control over their bids or who have varying performance goals across different campaigns.
CPC Advertising on Top Ad Platforms
As mentioned, every advertising platform supports CPC advertising and has fairly the same process to run ads. You find relevant keywords, create ad groups, bid on those keywords, and run your PPC campaigns. While PPC advertising is similar on all platforms, certain platform-specific nuances can influence the performance of your PPC strategies.
Let's look at how CPC advertising works on some major ad platforms.
CPC Advertising using Google Ads
Though several CPC ad platforms have emerged in the past few years, Google remains to be the market leader with a 73% paid search market share. It is the go-to choice for most advertisers because of its robust algorithms, intuitive interface, multiple advertising options, and more.
Keyword bidding on Google Ads works in a standard way. You need to find a keyword, create an ad group for it, and place your bid. The maximum bid wins the spot. Google calculates the CPC of the auction winner using the following formula:
Actual CPC: Ad rank of the runners-up / Winner's Quality Score + $0.01
Here, the ad rank is calculated by multiplying the maximum CPC bid to the Quality Score.
** Refer to the later sections to learn more about Quality Score and other CPC advertising metrics. **
CPC Advertising using Microsoft Ads
Microsoft Ads (formerly Bing Ads) has made several changes to its advertising platform, leaving advertisers from all industries excited. CPC campaigns on Microsoft Ads are closely related to Google Ads. You need to find keywords, create an ad group, create a campaign, set your budget, and set your bid.
Unlike Google Ads, Microsoft doesn't have a set formula for calculating the CPC. It's determined dynamically based on various factors and changes constantly.
CPC Advertising using Amazon Ads
Amazon CPC Ads also uses the second price auction strategy, i.e., the actual CPC will depend on the second-highest bid. The Amazon platform uses a fairly straightforward method to calculate the actual CPC. Here's the formula used to calculate the final CPC:
Actual CPC: Second-highest bid + $0.01
Amazon PPC Ads work the same as Google and Microsoft Ads. However, since Amazon is a marketplace unlike Google and Microsoft, keyword research and other CPC strategies are different for the platform.
CPC Advertising on Facebook Ads
Facebook is the largest social media platform in the world, with over 2 billion users. It's also the second-largest digital advertising platform with a market share of around 20%. Advertising on Facebook is different from search engine advertising, as it has different ad types, advertising goals, and reporting.
Since Facebook is not a search engine, you don't need to find keywords and bid for them. You need to choose the demographics, advertising goals, and daily budget. In the bid strategy, you need to specify the lowest cost, cost cap, bid cap, and target cost.
CPC Advertising with LinkedIn Ads
LinkedIn offers various types of ad formats, one of the most popular being PPC text ads. Like Facebook, you don't need to choose any keywords.
All you need to do is choose your objective, select your targeting criteria, set your budget and schedule, and enter the bidding process.
LinkedIn Ads allows you to choose from three objectives:
CPC Advertising with TikTok
TikTok ads are a way for businesses to reach and engage with their target audience on the popular short-video platform.
TikTok offers several types of ad formats, including In-feed native videos, Brand Takeovers, and Branded Hashtag Challenges, that can be used to drive brand awareness, website traffic, or even sales. Businesses can also target their ads based on demographics, interests, and behaviours to ensure they reach their desired audience.
Advertisers can either run their TikTok campaigns themselves or partner with an agency for assistance.
CPC Advertising on Pinterest
Advertising on Pinterest can offer a number of advantages to businesses. Here are a few key benefits:
Large and engaged audience: Pinterest has over 400 million monthly active users, many of whom are actively searching for ideas, inspiration, and products. This makes it a great platform to reach a large and engaged audience that is already in shopping mode.
Visually-driven platform: Pinterest is a visual platform, where users are inspired by images and videos. This makes it a perfect fit for businesses in industries such as fashion, home decor, food, and beauty, where visual content can be especially impactful.
Targeted advertising: Pinterest offers a variety of targeting options, such as interest targeting, keyword targeting, and audience targeting, allowing advertisers to reach the right people with the right message.
Measurable results: Advertisers can track the performance of their campaigns in real-time, and make data-driven decisions to optimise their campaigns for better results.
Cost-effective: Pinterest advertising can be an effective and cost-efficient way for businesses to reach their target audience, compared to other forms of digital advertising.
In conclusion, advertising on Pinterest can be a valuable addition to a business's overall digital marketing strategy, offering a visually-driven platform with a large and engaged audience and targeted advertising options, all at a potentially lower cost compared to other platforms.
CPC Advertising on Snapchat
Advertising on Snapchat can offer several advantages to businesses, including:
Younger, highly engaged audience: Snapchat has a large and active user base of predominantly younger individuals, making it a great platform to reach this demographic. These users are highly engaged with the platform, spending an average of 30 minutes a day on Snapchat.
Innovative ad formats: Snapchat offers a variety of ad formats, including Snap Ads, Lenses, and Filters, which can be interactive and engaging for users. These unique ad formats allow businesses to stand out and capture the attention of users.
Targeted advertising: Snapchat provides businesses with the ability to target users based on demographics, interests, behaviours, and location. This allows for highly relevant and personalised advertising.
Measurable results: Snapchat offers robust analytics and reporting capabilities, allowing businesses to track the performance of their campaigns and make data-driven decisions to improve results.
Cost-effective: Snapchat advertising can be a cost-effective way for businesses to reach a large and engaged audience, especially compared to traditional forms of advertising.
In conclusion, advertising on Snapchat can be a valuable addition to a business's digital marketing mix, offering the ability to reach a young, highly engaged audience with innovative ad formats, targeted advertising options, and measurable results, all at a potentially lower cost compared to other platforms.
Top CPC Advertising Metrics to Track
There are over 25 paid advertising metrics you can track, with all telling a different story. Some metrics or key performance indicators (KPIs) focus on conversions, some on revenue, some on profitability, and some on brand awareness. Which metrics to track can be confusing.
However, tracking the right metrics is the key to running relevant ads and ensuring you don't waste money. Here are the nine most important CPC advertising metrics you should track to run successful PPC campaigns.
Total Clicks: The number of clicks resembles brand awareness and visibility. If your ads have more clicks, it means they appear on the search engine result page quite often.
Cost Per Click: The cost per click (CPC) is the ultimate metric to track in a CPC strategy. If you have a lower CPC, it means you're getting cost-efficient clicks or overspending on advertising.
Impression Share: Impression share is also an awareness metric that tells how often your ad shows up for your target keywords. A high impression share means your ad is frequently appearing in search queries.
Click-Through Rate (CTR): CTR is an engagement metric that refers to the number of clicks your ads get. It's calculated by dividing the total number of clicks by the total impressions.
Cost Per Conversion: Cost per conversion is a performance metric that shows the average money spent to get a sale.
Total Conversion Value: Also known as customer lifetime value (LTV), total conversion value refers to how much an entire conversation is worth.
Return on Ad Spend (RoAS): RoAS is a conversion metric that tells how much money you make (or lose) on each dollar spent. It's similar to the return on investment (ROI).
Quality Score: Quality Score is one of the most critical CPC advertising metrics to track if you advertise on Google. It denotes the quality and relevance of your ads by assessing your landing page copy, ad copy and ad text, and keyword list.
Best Practices to Improve Your CPC Ad Campaigns
CPC advertising is a comprehensive topic with many concepts, techniques, and practices. It's a specialised field where the more experience you gather, the better you become. However, there are a few best practices you can follow to make your CPC campaigns more effective.
Here are some techniques and strategies you should implement when running paid ads regardless of the platform.
1. Target Relevant Keywords
Chances are you have already realised the importance of keywords for CPC advertising on search engines. The keywords you target can make all the difference between the success and failure of your advertising campaign.
Now, how to identify a good keyword? Well, many new CPC advertisers chase keywords with high volumes. While high-volume keywords are certainly the best pick, they're also the most competitive.
Long-tail keywords (keywords with three or more words) are less competitive and easier to target. They're also laser-targeted with a high buying intent. Therefore, targeting long-tail keywords can help you outshine your competition and get more sales.
A great way to unearth relevant keywords is through PPC competitive analysis.
2. Use Negative Keywords
A negative keyword is a keyword that you don't want to target. Most search engines let you opt for broad keyword matching. This means your ads can show up if a user searches for a keyword that is partially similar to your target keyword.
For example, suppose you sell running shoes. If you turn on broad matching, your ads may appear if someone searches for sports shoes or basketball shoes.
However, this also means your ads may show up for keywords that you don't want to target. For example, if someone searches for "Nike running shoes," they're clearly looking for Nike running shoes. You may not want your ads to show up in such cases.
You can use negative keywords to ensure that your ads don't show up for irrelevant search queries. Creating a negative keyword list helps you protect your advertising capital and get only authentic and relevant clicks.
Check out our guide to negative keywords to get started making your list.
3. Develop an Effective Bidding System to Reduce Ad Spend
Bidding is another essential element of an effective CPC strategy. As discussed, there are various CPC approaches you can use.
The strategy you implement will depend on your objectives. It's better to diversify your advertising portfolio by trying different bidding strategies for different ad groups.
4. Get the Timing Right
You might be tempted to run CPC ads 24/7; however, it isn't always the best bet. You'll be spending a lot of money if you run your ads around the clock.
Of course, you can advertise the entire day if your target audience is global. If you're targeting a specific region or country, you could run your ads during the day and turn them off at night.
5. Expand Across Ad Platforms
Google Ads is so popular that you may easily forget other CPC platforms. Dozens of advertising platforms exist, and they can produce amazing results. Why not allocate a portion of your advertising budget to these platforms and see how they perform?
Facebook Ads go well with Google Ads. You can follow this guide to combine your Google and Facebook ad campaigns. Some less popular ad networks like BuySellAds, Bidvertiser, and AdRoll also exist where you can run CPC ads for a low average CPC cost.
You can talk to us to understand how a paid social agency can boost your sales results quickly.
6. Monitor Key Performance Indicators
Once your ads are live, monitor them consistently and see how they perform. All ad platforms have a section for reporting and analytics where you can check metrics like average cost, maximum cost, conversion rate, ROAS, quality score, etc.
You can make informed decisions based on these metrics. For instance, if you have a low-quality score, it's a sign that Google wants you to optimise your landing pages or ad copies. Thus, you can get a higher quality score by making those changes.
Read our guide to the top eCommerce KPIs to spot the difference between valuable numbers and vanity metrics.
A successful CPC strategy is all about getting more cost-efficient clicks by finding the right keywords and implementing appropriate bidding and budgeting strategies. Advertisers should also expand across different advertising platforms to get better results.
However, a lot depends on testing and data analysis in PPC advertising. You need to try different keyword lists and multiple platforms, add negative keywords and try various bidding strategies to find a winning combination.