What is cost-per-click (CPC)?

Cost-per-click (CPC) is a pricing model used in online advertising, particularly in platforms like Google Ads, where advertisers pay for each click on their ads. Here's a detailed explanation of CPC:

### Definition:

Cost-per-click (CPC) is the amount of money an advertiser pays each time a user clicks on their advertisement. In Google Ads, CPC is determined through a bidding process where advertisers set a maximum CPC bid—the highest amount they are willing to pay for a click on their ad.

### Key Points to Understand:

1. **Bid System**: Advertisers compete in auctions to have their ads displayed. The actual CPC paid can vary depending on competition from other advertisers, the quality score of the ad, and the ad rank.

2. **Ad Rank**: Google Ads uses a combination of your maximum CPC bid and the quality score of your ad to determine its position on the search results page. Advertisers with higher ad ranks typically pay less per click and may appear higher on the page.

3. **Manual and Automated Bidding**: Advertisers can choose to set bids manually or use automated bidding strategies provided by Google Ads, which adjust bids in real-time based on various factors like device, location, time of day, etc.

4. **Billing**: Advertisers are billed when someone interacts with their ad, either by clicking on it (CPC) or by viewing it in certain display networks (CPM—cost per thousand impressions).

### Factors Affecting CPC:

- **Competitiveness**: Keywords with high competition may have higher CPCs.
 
- **Quality Score**: Ads with higher quality scores (determined by factors like relevance, landing page quality, and expected click-through rate) can achieve higher ad ranks with lower CPCs.
 
- **Ad Position**: Higher positions on the search results page generally require higher bids to maintain.

### Benefits of CPC:

- **Cost Control**: Advertisers only pay when users engage with their ads, making CPC a measurable and cost-effective advertising model.
 
- **Performance Tracking**: CPC allows advertisers to directly measure the effectiveness of their ads based on clicks and subsequent actions.

### Limitations:

- **Budget Considerations**: High CPCs in competitive industries can require substantial advertising budgets.
 
- **Click Fraud**: Occasional fraudulent or unintentional clicks can increase costs without benefiting the advertiser.

### Conclusion:

Cost-per-click (CPC) is a fundamental metric in online advertising, particularly in paid search campaigns like Google Ads. It enables advertisers to effectively manage their budgets, measure performance, and optimize their campaigns to achieve their advertising objectives efficiently.