Cost per click (CPC) is an advertising pricing model which allows advertisers to pay publishers for each click made on their advertising. This model is used by Google AdWords and Facebook. This is a great way to correlate your advertising investments with the ROI.

In this article, we'll explain the way cost-per-click advertising works, shed light on the good average cost per click, share a formula to calculate this metric, and offer some tips to reduce your cost per click in Google Adwords.

How does cost per click work?

Advertisers can use two cost-per-click models. The first one is fixed. It implies cooperation between an advertiser and a publisher without any third-party platform. They agree on a price an advertiser pays for each click on their ad.

The second model is based on bidding. Bidding means the maximum budget an advertiser can afford to pay for each click on their ad. They use keywords to place bids. If several advertisers use the same keyword, the future of the ad depends on the auction. The advertisers' maximum bid and the quality score are the main factors taken into account by Google to determine which site will get the higher position on the SERP. Hence, the more an advertiser is willing to pay for each click and the better his site is, the more chances their ads have to make it to the target audience.

By this time you should be very interested to know the average cost per click. So, let's consider it.

What is a good average cost per click?

It depends. There's no fit-every-business answer. You should take into account your industry, type of product, the target audience, type of advertising itself, etc. Nevertheless, the average cost per click in AdWords is $2,69 for search and $0,63 for display.

According to the Google AdWords industry benchmark, consumer services and legal services have the highest cost per click — $6,40 and $6,75. If you deal with eCommerce or travel and hospitality, there’s good news for you. These niches have the lowest cost per click — $1,16 and $1,53. Check out the report below for more details.

Average cost per click

Source: WordStream

Now, it’s time to find out how to calculate cost per click.

How to calculate cost per click?

Recall the cost-per-click models we’ve mentioned before. If you use the model based on the bid, your cost per click will be either less or equal to your maximum bid. This is predetermined by the quality score, the bids of your competitors, and their ad rank as well.

If you cooperate with a publisher directly, you can calculate your cost per click when your advertising campaign ends. For this purpose, use the formula below.

Cost per click = Ad cost/Number of Clicks

So, if you spent $500 on your campaign and received 114 clicks, your cost per click would be $4,3 (500/114). This information allows you to understand whether this campaign was effective and make the necessary changes to your promotional strategy.

Now that you know the average cost per click and can calculate your own one, we’ll share some effective tips that will help you decrease your cost per click.

How to reduce cost per click in Google AdWords?

Follow the tips below to optimize your advertising investments.

  1. Use keywords with low competitiveness. It’s no wonder that the higher the competition is for a certain keyword, the more you’ll have to pay for it. So, consider low-competitive keywords to save money.
  2. Use long-tail keywords. Such keywords can save you a fortune. They have low search volume but represent a clear user intent. Hence, they cost less than generic ones. Besides, this type of keyword has a positive impact on the quality score, which, in its turn, can lower the CPC.
  3. Work on improving your quality score. This is one of the major factors for Google when determining your cost per click. To increase your quality score, pay special attention to your keywords, ad text, and landing page. All these elements should be relevant to each other. Also, your CTR matters. If it’s high, Google understands that users find your site useful, so it makes it easier for you to promote.
  4. Schedule ads. There’s no point in should your ads 24/7 since you can spend your budget in vain. Conversely, conduct research to find out the days and time of the day when your audience is most active and engaged. Hence, your audience will see your ads only when they’re most likely to convert.
  5. Make use of geo targeting. Focus your efforts on certain areas with the most engaged audience. You can select the country, city, areas, regional code, and even radius to create highly targeted ads.
  6. Create a list of negative keywords. These are queries that have nothing to do with your business but they can appear in your list. For example, you sell eyeglasses. It’s highly important to add wine glasses and drinking glasses to your list of negative keywords. Otherwise, you’ll spend money in vain.

Congrats, now you know how CPC works, know the average cost per click for different industries, have a formula and 6 tips to reduce your cost per click.

References

  1. This article explains how to get the most out of CPC and PPC advertising.
  2. This article provides more tips to reduce your CPC.
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