Cost per click (CPC)
Also known as: CPC, average CPC, pay per click, PPC
Cost per click (CPC) is the average amount an advertiser pays for one click on an ad, calculated as media spend divided by the number of clicks.
CPC = media spend / clicksCPC shows what one visit from paid media costs. It sits between CPM, which prices the impression, and cost per lead, which prices the contact. Because CPC equals CPM divided by (1,000 × CTR), a rise in cost per click always has one of two causes: impressions got more expensive or fewer people clicked.
Example
A compliance software vendor runs Google search and LinkedIn in the same month.
Google search: spend $12,000; clicks 2,400. CPC = $12,000 / 2,400 = $5. LinkedIn: spend $12,000; clicks 1,000. CPC = $12,000 / 1,000 = $12.
On CPC, search wins by more than double. Then the landing page data arrives: search visitors convert to a demo request at 2%, LinkedIn visitors at 6%. That gives 48 leads from search at $250 each and 60 leads from LinkedIn at $200 each. The more expensive click produced the cheaper lead. The figures are illustrative.
How to use it
Use CPC to manage bids and to spot auction changes early. Track it weekly per campaign, and when it moves, split the change into CPM and CTR before acting. A CPM rise points to competition or audience size; a CTR drop points to creative fatigue or a weaker match with intent.
Do not set budgets on CPC alone. Set a target cost per lead or per customer, and let the allowed CPC follow from it: allowed CPC = target cost per lead × landing page conversion rate.
Common mistakes
- Cutting a channel because its clicks are expensive without checking what those clicks convert into.
- Comparing CPC on brand keywords with CPC on generic keywords inside one blended average.
- Using maximum bid and actual average CPC as if they were the same number.
- Leaving invalid and accidental clicks in the denominator, which makes the click look cheaper than a real visit.