But what is CPC? And how large of a role should it perform in your marketing choices? That’s the most often asked question. While cost-per-click is absolutely an essential part of PPC advertising, it is only useful if you know how it goes into your overall marketing plan.
What is Cost-Per-Click?
The term cost-per-click is what seems like a summary of how much an advertiser paid for a click.
However, since the term is so firmly attached to the concept of pay-per-click advertising, many people use PPC and CPC reciprocally, even leading to pay-per-click advertising as cost-per-click advertising. It is not a very popular term amongst marketers, but you do hear it drifting around from time to time.
The History of Cost-Per-Click
Until Google began the paid search market, the term CPC was not all that popular. As with several other aspects of the internet, Google developed all of that almost overnight.
After Google launched PPC to their AdWords platform, online advertising soon enhanced a much more viable marketing way. PPC and CPC enriched concepts that every marketer and most business proprietors would require to master if they expected to run a valuable online business.
Why Cost-Per-Click is Vital
Many business owners manage to reminisce about cost-per-click in somewhat absolute terms: cost-per-click is the cost of advertising online. But while that’s an accurate representation, CPC is much more difficult than that. You understand, CPC is the answer to a business problem: How do you earn money off from an online user base?
Up until Google’s breakthrough triumph with their CPC model, organizations like Yahoo! were constructing a user base, but they didn’t understand how to monetize those users. Everyone knew there was a lot of power in having a big following, but no one had solved the code on how to convert that audience into cash.
With the CPC basis, Google showed that you could earn money off of an online audience using a pretty simple formula: Build an online platform that solves an unmet demand in the marketplace.
Create a large user base of people who completely trust the platform. Charge companies to advertise to that userbase seamlessly—without breaking users’ trust. The model has been applied by a variety of businesses ever since. For example, Facebook. Facebook started in 2004 as a community for people to connect and stay in contact with friends, family, and co-workers.
Whether Zuckerberg recognized it or not, he had just explained a demand in the marketplace. It was not that Facebook was not the first one to approach this problem—just like Google was not the first company to provide online search results—Facebook just met that need more efficiently.
With the News Feed and other comments, people could undoubtedly interact with people they cared about and on a social platform that they believed. As a consequence, Facebook caught off. Once it had a large userbase, Facebook was then able to monetize its platform by providing advertisers the facility to put their content to users’ feeds—for a reward.
The same pattern has followed over and over. Instagram, Twitter, LinkedIn, Pinterest, Reddit—wheresoever a business could get an opportunity to form a decent-sized user base; they can create money with the CPC standard.
While it is fascinating to compare a user clicking with their business in your services or products, w have found that there is often a contradictory correlation between CTR and conversion rate. The exchange rate is the percentage of users who take a particular action once they have visited your website. It could be downloading a white paper, obtaining a phone call, or buying a product. It’s an activity that converts to a sale or takes a step that could lead to a trade.
It delivers perfect sense. Optimizing for click-through rate is all about landing more people to click. Optimizing for conversion rate is all about making the best people to the website, those most prone to act. These two ideas often work against each other. Unless the proposal is something that interests most users, like a sweepstakes entry, only certain people will take the work a marketer is pursuing as a conversion.
More than any other tactic, CTR is used as a progress metric in paid search advertising (Google AdWords). It is mistaken. When managing paid advertising on search engines, advertisers only spend when someone clicks on their ad. Attempting to get as many people to succeed as possible should not be the purpose of this kind of campaign. If anything, you want to change the people who click. Practice ad copy that only attracts people who are ready to bring an action. The best metrics to define success are conversion rate and cost per conversion. The end is all about return on investment (ROI).
When measuring the cost per conversion, the click-through rate is not a circumstance. The more meaningful metric is the cost per click (CPC). Because clicks on Google AdWords are exchanged in an auction-based bidding method, digital marketers have a lot of authority over how much they will pay for clicks. Once a forbidding conversion rate has been settled, the highest CPC only can be measured to present only profitable conversions.
Admittedly, there are times when CTR is an essential metric and one that should be considered. Maybe you are testing various offers or different messages. Google AdWords can be a remarkably powerful platform for examining taglines and purposes. When you need to see what gets people to respond, CTR is a metric that can and should be used to see what works best.
After reading this, hopefully, you have a good quality for what cost-per-click is, where it comes from and what it intends for your business. Indeed, though CPC will always be an essential part of PPC advertising, it assuredly is not the be-all and end-all of online marketing.
Author Bio: Harnil Oza is CEO of Hyperlink InfoSystem, one of the leading app development companies in New York and India, having a team of the best app developers who deliver the best mobile solutions mainly on Android and iOS platforms.