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Ecwid Ecommerce Glossary

Cost Per Click (CPC)

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What is Cost Per Click (CPC)?

Cost Per Click (CPC) is a pricing model used in online advertising, particularly in pay-per-click (PPC) advertising campaigns. In other words, CPC is the cost incurred for each click on an advertisement.

CPC is commonly used in platforms like Google Ads, Facebook Ads, Bing Ads, and other online advertising networks. Here’s how it works:

  • Advertisers bid on specific keywords, demographics, or other targeting criteria relevant to their products or services. These bids determine how much the advertiser is willing to pay for a click on their ad.
  • When a user enters a search query or encounters content relevant to the advertiser’s targeting criteria, an auction is triggered. The advertising platform considers factors such as bid amount, ad quality, and relevance to determine which ad will be displayed.
  • If the advertiser’s ad wins the auction, it is displayed to the user. If the user clicks on the ad, the advertiser is charged the amount of the bid.
  • The position of the ad on the search results page or other advertising placements depends on a combination of factors, including bid amount and the quality of the ad and landing page. Higher-quality ads might achieve better ad placements even with slightly lower bids.

The advantage of the CPC model

  • Advertisers have better control over their advertising expenses. They only pay when someone clicks on their ad, which means they’re directly paying for potential customer engagement rather than just for ad views.
  • CPC provides clear and measurable results. Advertisers can easily track the number of clicks their ads receive and calculate the cost associated with each click. This makes it straightforward to evaluate the effectiveness of the advertising campaign.
  • Since advertisers can bid on specific keywords or target audiences, CPC allows for precise targeting. This means ads are more likely to reach people who are genuinely interested in the product or service being offered.
  • Because users have to click on the ad to incur a cost, CPC tends to attract more engaged and interested users. This can lead to higher-quality traffic, potentially resulting in better conversion rates.
  • Advertisers can set their own budget limits and adjust their bids based on performance. This flexibility allows for experimentation and optimization to find the most effective bidding strategy.
  • With real-time data on clicks and costs, advertisers can quickly identify what’s working and what’s not. This enables them to make data-driven decisions, refine their ad campaigns, and allocate budget to the most successful ads.
  • Compared to other models where advertisers pay based on ad impressions, CPC minimizes the risk of spending money on ads that don’t generate any interactions. Advertisers pay only for actions (clicks) that have the potential to lead to conversions.

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