Whether you create your Google Ads campaigns yourself or if you want choose a service provider to support you, it is important to understand how they work. In this article, we explain to you in concrete terms what this concept of cost per click means so that you know how much to invest in your campaigns according to your goals.
Cost per click (CPC) is the price an advertiser pays each time a user clicks on their ad. This type of billing is very common when it comes to acquiring traffic on paid channels. The advertiser pays a fee only if the user clicks on his ad, and not for the number of impressions (= number of times the ad was displayed on the search engine). CPC is used in various online advertising platforms such as Google Ads, Meta Ads, LinkedIn Ads, etc. It is generally considered to be a fairer and cost-effective pricing method for advertisers as they only pay for actual clicks.
To go into more detail, we distinguish 3 types of CPC.
This is the maximum amount an advertiser is willing to spend on a keyword. The advertiser defines this amount at the level of the ad group or the Google Ads keyword. The max CPC is generally determined based on the objective of your advertising campaign, your budget, and the value you assign to each potential click on your ad. Depending on the competition for the keyword or audience target for your ad, the actual cost per click you'll pay may be less than your max CPC. Generally, a higher max CPC can improve the visibility and position of your ad, but it can also increase the total cost of your ad campaign.
It is the average cost paid by an advertiser for each click on a given ad. The average CPC is calculated by dividing the total cost of the advertising campaign by the total number of clicks generated. It varies depending on many factors, such as competition for keywords, the type of advertising, the advertising platform used, the geographic location of the user, and the quality of the ad itself. The average CPC is an important indicator for businesses because it allows them to understand the true cost of each click generated by their advertising campaign. It also provides information that makes it possible to assess the profitability of an advertising campaign in order to optimize its performance.
This is the final cost per click defined by Google. It takes into account all the factors that can affect the cost of online advertising. Unlike max CPC, which is the maximum amount an advertiser is willing to pay for a click, real CPC is the actual cost paid for each click on the ad after an auction has been won. The actual cost per click is often less than the maximum CPC, but it can vary depending on the competition for advertising auctions, the quality of the ad, the Quality Score keywords and the landing page.
Cost per click is a variable, established based on trends and the use of desired keywords. This CPC also depends on the “ad rank” of the advertiser, i.e. on his ranking compared to other ads. This ranking is set up by Google according to the “quality score” of the advertiser as well as the maximum cost per click that the advertiser is ready to pay. Believing that whoever has the biggest budget on Google Ads will get a lower cost per click is a mistake. Indeed, this CPC also depends on the quality score, established according to expected click rates, the relevance of the keywords, the quality of the ad, the CTR (click rate) as well as the quality of the landing page. An advertiser who is ready to put a maximum CPC higher than yours will therefore not necessarily be better positioned than you in the ranking. As you will have understood, it depends on the quality score, which is an element that should not be overlooked when managing advertising campaigns.
As mentioned earlier, the CPC is also the result of an auction system that is subject to the laws of the market. As with traditional auctions, the higher the demand, the higher the price will be. It works in the same way with cost per click: if a keyword or query has a very high volume, then the average cost per click will increase. This is why a keyword with competition and a fairly high overall volume will have a higher cost per click than a keyword that is rarely used by competitors. This model follows the logic of “traditional” advertising: broadcasting your advertising on a national medium will cost much more than displaying it on a medium with a local audience.
Lowering the average cost per click starts with choosing low-volume keywords. If you are operating in a niche market, then you won't have too many problems. On the other hand, if you sell products or services en masse, you will have to reduce these costs with more specific keywords or long tails. The objective is to target a more specific audience and to reduce keyword competition in order to reduce the average cost per click.
A high-quality ad with high relevance to the targeted keywords can improve the click-through rate and ad quality score, which can lower the average cost per click. Google gives each ad a score (poor, average, good, excellent), the aim being, of course, to obtain a “good” or even “excellent” rating. Your ad message should perfectly match your keywords. To meet the user's query, it should not be too specific or too broad.
To increase the Quality Score of your keywords, here are a few things to take into account:
The budget for a Google Ads campaign is prepared exactly like the budget for another project. Think of it as an investment. This budget can therefore be subject to changes, whether upward or downward. The Google Ads platform allows you to monitor each campaign with a dashboard and statistics on key data to manage your account.
The budget to be allocated to a Google Ads campaign depends on several factors:
It is also interesting for you to measure the cost of a Google Ads campaign. Imagine an ad with an average cost per click of €0.4 and you need around 250 clicks to get 5 leads (i.e. a conversion rate of 5%). The budget will therefore be 0.4 x 250 = €100 for your campaign.
By dividing the number of real clicks by the number of impressions (statistics given on the Google Ads interface), you will get your click rate (CTR), which you should try to increase constantly. Remember that it is this CTR that will improve your quality score (and therefore the cost per click).
The most important data among all these figures will be the cost of acquiring a customer (CAC). To calculate the cost, you simply divide your investment by the number of signed leads. If you want to know your cost per lead (CPL), the calculation is the same, but with the number of conversions this time. If you have accurate knowledge of your costs and the margin you get on your products or services, you can know if your CAC is higher than what you should have for your Google Ads campaigns.
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The Google Ads tool has evolved a lot in recent years, especially in terms of bidding strategies. Indeed, bidding strategies on Google Ads can have a significant impact on the cost per click (CPC) of advertising campaigns. Here are a few examples of bidding strategies and how they impact CPC.
This strategy allows advertisers to set a maximum CPC for each keyword. Google Ads then uses this limit to automatically adjust bids to achieve optimal positioning, while respecting the advertiser's budget. If the max CPC is too low, the ad may not show, while higher max CPC may result in higher costs per click.
This method allows advertisers to define a target CPA, which is the amount they are willing to pay for each conversion. Google Ads automatically adjusts bids to reach the target CPA, while maximizing the number of conversions. This strategy can lead to higher costs per click, but it can also improve the quality of conversions.
This strategy, on the other hand, allows advertisers to set an impression rate target for their ads. Impression rate is the percentage of times an ad is shown based on the number of times it is eligible to be shown. With Target Impression Bidding, advertisers set a percentage of impression rates they want to achieve for their ads. Google Ads then automatically adjusts the bids to maximize the chances of reaching this goal, which inevitably causes the CPC to fluctuate.
There is no ideal average cost per click on Google Ads because it depends on many factors such as the advertiser's industry, the keywords used, the competition, the history of the Google Ads account, the quality of the ads, the quality of the ads, the bidding strategy employed, and many more factors. The cost per click can vary considerably from campaign to campaign.
The ideal cost per click also depends on the goals of the advertiser. For example, if your goal is to get conversions, the cost per click should be low enough to allow for a positive return on investment for each conversion. If the goal is simply to generate traffic or brand awareness, a higher cost per click may be acceptable.
In conclusion, cost per click should be considered in the context of the advertising campaign. You need to analyze the conversion rate, return on investment, and cost per acquisition to determine if a campaign is profitable.
It's important to track campaign performance and adjust bids and budgets accordingly to maximize results. To do this, do a Google Ads audit may be relevant in order to identify the main ways to improve your PPC investments.