CPC or Cost per Click refers to the pre-determined amount the advertiser agrees to pay each time his ad is clicked on by a user. This method of cost valuation is used in online advertising programs such as banner advertising and search engine marketing programs like Google’s AdWords. It may be a fixed amount or based on competitive bidding.
With search engine marketing programs like AdWords, cost per click amounts may vary within a pre-determined range based on competitive bidding. Costs, referred to as “bid” amounts, are usually set at the keyword level and are determined by the competitive bid amount.
Even though the same text ad may be generated by a variety of the advertiser’s keywords, the cost per click amount results from a number of factors including the specific keyword that generated the ad, the competitive bidding environment at the time of the click, and the maximum bid amount associated with the keyword that generated the ad that was clicked.
For example, a “basement waterproofing” advertiser associates a maximum bid amount of $3.00 to the keyword phrase “wet basement.” Bidding is not so competitive in the morning so when that keyword generates her ad and the user clicks on it the cost per click amount is only .65 cents. Later in the day it pours rain and the competitive bidding increases dramatically. When the same keyword phrase, “wet basement,” generates the ad and the user clicks on it the cost to the advertiser is now the maximum bid amount of $3.00.
Careful and structured management of cost per click amounts and competitive bidding strategies ensure the best possible ‘return on advertising spend’ and the lowest possible ‘cost per conversion.’
See also Competitive Bidding, PPC-Pay per Click, CTR-Click Through Rate, CPM-Cost per Thousand Impressions, SEM-Search Engine Marketing, Online Advertising, Internet Advertising, Conversion Rate
