What is CPC and Why it is Important in Advertising?
CPC stands for Cost Per Click which is the amount earned by a publisher each time when a user clicks on an ad unit displayed containing his / her publisher ID. From the advertiser’s perspective CPC is the amount paid by him / her for each single click. CPC model is also referred as Pay Per Click (PPC) advertising since the payment is settled on per click basis.
PPC is the popular advertising model which has many formats like CPC, CPM, CPA, etc,.
How CPC Works?
CPC is the term linking an advertiser, a publisher and any third party mediators like Google. The popular advertising platform Google AdWords uses CPC model as one of the bidding method for charging advertisers. Google uses the same CPC model for paying the publishers through its AdSense program after deducting the revenue sharing portion.
- Advertisers use Google AdWords platform for creating advertising campaigns.
- Advertisers choose the keywords for which the ad should be shown and offer a bid for each click (CPC). Let us assume advertiser A offers a CPC of $1 for an ad which is the highest offered bid for a particular keyword.
- Publisher B registered though AdSense program enabled ads on his site which has the keyword chosen by the Advertiser A.
- Now based on the keyword match, Google will think the interest of Advertiser A and Publisher B are matching.
- In order ensure the highest revenue for publisher B, Google will auction all the bids placed by different advertisers and choose the highest bid. In this example, this is from advertiser A with $1 value for a click.
- The ad will be displayed on the publisher B site. When a user clicks on the ad, $1 will accrue for publisher B as earning and for advertiser A as spending.
- Since Google plays a vital role in connecting a publisher and an advertiser they will take a commission of 32% on each click and pays the remaining 68% of the accrued earnings to publisher, in this case publisher will get 68 cents and Google will get 32 cents for each click.
In case if the publisher uses any other AdSense revenue sharing sites then the earnings will be reduced further based on the percentage of sharing. Below is an example of revenue sharing for content ads and search ads with 50% deducted by revenue sharing site.
Calculation of CPC
CPC is calculated by dividing the estimated earnings by total number of clicks received.
In the above example, CPC for the publisher B is 68 cents and CPC for the advertiser A is $1. Advertisers can check the CPC amount quoted by them in their AdWords account and publishers can see the CPC in their AdSense account.
Why CPC is Important?
CPC is the most important factor that decides the earnings of the publishers. As far as we have analyzed CPC depends on three simple factors – country, keywords and quality/age of the site.
The geographical location of the user clicking on an ad is the first factor will decide how the advertiser is willing to pay. Generally clicks from USA, Canada, UK, Australia, etc. tend to get more CPC while clicks from India, China, Indonesia, Philippines, etc,. tend to get less CPC.
CPC and Keywords
Advertisers place different bid for different keywords. You can use tools like Google AdWords keywords planner to understand the bidding for category of keywords. In General, sites talking about recipes, stories, gossip, cinema news, etc attract CPC as low as USD 0.05. While sites with finance and insurance related content attract CPC as high as USD 100.
CPC and Site Aging
It is also true that two sites with similar content will not attract same CPC from the advertisers. For example, you can’t expect the CPC rate of CNN or BBC when you are starting a new news site. What we noticed is that the same site which attracts USD 0.05 at the beginning may earn USD 1 per click after few years of time. The reason is simple that once the brand name is established, advertisers may tend to bid on the particular site for brand name instead of bidding merely on keywords. Also the quality of the content will improve on any site over the period of time thus attracting more visitors and high CPC.
So if you are a AdSense publisher then monitor your CPC with various performance reports. The key for success is the keywords and the patience to establish a website to get quality traffic from USA.