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Cost-Per-Click: What Actually Determines Your CPC?

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Online advertising has become an essential component when promoting your product or service to your target audience.

However, with so many different mediums and channels to participate in pay-per-click (PPC) advertising, how do you know you’re getting the lowest cost-per-click possible?

Whether you’re advertising on search engines or social media, understanding all the factors that affect your CPC is crucial to maximizing your advertising budget.

What's Your Actual Cost-Per-Click?

Google

With Google Adwords, there are several factors that affect a marketer’s CPC. Unlike Facebook, Adwords is a keyword-based PPC platform that takes into account the ad text, keywords, landing page and maximum bid to then rank the ad based off of accuracy and user-experience.

As a result, every time a query is searched all ads that have bid on that keyword goes to “auction” to try and rank higher than the other competitors. But, unlike an estate sale, the highest bidder doesn’t always win. Again, Google takes into account how specific you craft your ad and landing page to the keyword queried.

For example, let’s say you bid $7 on the keywords “pink purses,” but your landing page shows red backpacks. Obviously, this creates a poor user experience since the end-user doesn’t find what was advertised. Now if a competitor bids $5 on the keywords “pink purses” and uses a landing page that only shows pink purses, although the bid is lower, they’ll have a higher rank than the marketer with the $7 bid. For more examples on the ad auction and how it works, see this article.

Ultimately, the price of a marketer’s actual CPC depends on the outcome of the auction. Usually, this cost is lower than your maximum bid because you only have to pay just above the price of the ad ranked below you.

Other areas that affect CPC are seasonality. Some companies choose to only advertise during certain seasons so they may bid higher because they have the budget. High consumer traffic holidays, such as Valentine’s Day, Christmas, etc., have heightened competition among marketers, which in turn, have raised costs.

Bing

With Bing Ads, everything functions very similarly to Google Adwords. It, too, is a keyword-based PPC platform that takes marketers’ auction and ranks those ads accordingly. Below is an illustration breaking down how Bing assigns CPCs. For some great examples on how this works, see this blog.

Moreover, quality score plays a major role in lowering your CPC for the exact same ad rank. For both Bing and Google, the quality score acts as a rating system for campaign success. The higher it is, the less you will pay for the same ad rank position.

Factors that affect quality score are:

  • Keyword relevance
  • Landing page relevance
  • Landing page quality

Conclusively, by creating advertisements with the end user in mind, you alleviate CPC pain points.

Facebook & Instagram

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Having the largest audience of all the social media platforms, Facebook has become a terrific option for both B2B and B2C strategies. Offering a wide variety of targeting options, marketers are able to target end users through demographics, geographics, previous user behaviors and interests.

However, the common misconception when advertising on Facebook and Instagram is the competition involved when targeting your audience. Instead of it being more industry-based like Google or Pinterest, with Facebook you are competing against all other marketers targeting that same demographic. For example, young women are a popular demographic targeted by retailers, publications, credit card companies —  you name it. The level of competition for that demographic will impact and inflate the cost-per-click for the ad.

Another factor that can increase your CPC is an out-of-tune targeting strategy. In order to evaluate the success of your targeting strategy, Facebook released the “relevance score” tool, which measures the relevance of your ad to your target audience. Ranging on a scale from 1 to 10, the lower the score, the higher your cost of advertising, especially when you’re advertising on a cost-per-impression basis.

Coinciding from this metric is the campaign’s click-through-rate (CTR). Naturally, a higher CTR indicates a higher relevance. For a more in-depth view of these areas and specifically Facebook advertising, see this blog from Ad Espresso.

All-in-all, by understanding these CPC contributors you can manipulate these areas and understand how to get the best results with the lowest investment. Now it’s your turn!

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