Cost per click refers to the price a company is willing to pay an advertiser (like Google Adwords) to have their ad clicked on by potential customers. When determining the cost of running ads, sellers must consider how much they are willing to pay to have their ad clicked on to drive customers to their website. The total cost per click is determined by several factors including maximum bid, quality score, and ad ranking of competitors.
What determines the CPC?
- Maximum Bid: The most you, the advertiser, are willing to pay per click within your advertisement platforms like Google AdWords and Bing Ads.
- Quality Score: This is Google’s rating of the quality of your keywords. It is based on several factors including the click-through rate, the relevance of the words in your advertisement, your landing page quality, and historically how well your advertisements performed. To increase your quality score, search for highly relevant keywords to add to your campaign, so you increase your click-through rate.
- Ad Ranking of Competitors: Your ad ranking is the position of your CPC ad on a search results page. Your CPC depends on your competitor’s ad rankings.
Here is the formula for calculating your CPC:
(Competitor Ad RankYour Quality Score) +.01=Actual CPC
Running online ads can be hugely beneficial to your online business as it can bring visibility to your brand and your products. The cost of running ads can vary and greatly depends on the ad channel as well as industry. When done correctly, advertising with channels like Google Adwords can be a highly useful and relevant asset to your e-commerce business.