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Understanding Average CPC & Average Cost

In the dynamic world of digital marketing, understanding key metrics is paramount for campaign success. One such vital metric is the average cost-per-click (Average CPC), which, along with the average cost, acts as a barometer for campaign performance in pay-per-click (PPC) advertising platforms such as Google Ads. So, what exactly is average CPC, and why does it matter? In the following guide, we’re going to go over everything you need to know about CPC, how to optimize yours, and help you understand why this key metric can impact your business. Let’s take a look!

What is CPC?

The term CPC stands for “cost per click,” denoting the amount an advertiser pays each time a user clicks on their ad. It’s a crucial metric for advertisers using PPC campaigns because it directly impacts both the cost of advertising and the return on investment (ROI). 

The average CPC is simply the average amount you’ve been charged for a click on your ad. It’s calculated by dividing the total cost of your clicks by the total number of clicks. This metric is significant as it allows advertisers to gauge the financial efficacy of their campaigns and determine whether their ad spend is generating a satisfactory return.

How CPC works in Google Ads

As you likely already know, Google Ads operates on an auction system, where advertisers bid on keywords relevant to their products or services. When a user performs a search query that matches the chosen keywords, Google displays the ads of the winning bidders. The actual CPC that an advertiser pays is determined by a combination of factors, including the bid amount, the Quality Score (a measure of the ad’s relevance and quality), and the competition for the keyword. 

In contrast, the ‘average cost’ in Google Ads is the average amount you’ve spent on a campaign, ad group, or individual ad over a specific period. It’s calculated by dividing the total cost of your ads by the number of times your ad was shown (impressions). Understanding these metrics – average CPC and average cost – is critical for several reasons:

Budget management

Knowing your average CPC helps manage your advertising budget more effectively. By understanding how much, on average, each click is costing you, you can allocate your budget to maximize ROI.

Campaign performance

These metrics enable you to assess the performance of your ad campaign. High average costs might suggest that you’re overbidding on keywords, or your Quality Score is low, prompting you to optimize your ads.

Keyword evaluation

CPC data is also useful in evaluating the profitability of different keywords. It helps identify which keywords are driving conversions and which ones are costing more than they’re worth.

Bid strategy adjustment

A clear understanding of your average CPC helps in adjusting your bid strategy. If your average CPC is high, you might need to reduce your bids or improve your Quality Score. If it’s low and you have budget headroom, you might consider increasing your bids to garner more clicks. 

Understanding the concepts of average CPC and average cost is just the beginning. The real challenge is learning how to optimize these metrics to improve the performance of your Google Ads campaigns, which we’re going to take a look at further on.

Optimizing your average CPC

Effective management of your average CPC can significantly enhance the performance of your Google Ads campaigns. Here are a few strategies to optimize your average CPC.

Improve your quality score

Google rewards advertisers who deliver high-quality, relevant ads with a better Quality Score, leading to lower CPCs. Enhance your Quality Score by improving your click-through rate (CTR), ad relevance, and landing page experience.

Utilize bid strategies

Google Ads offers several automated bid strategies that adjust your bids based on the likelihood of your ad getting clicked. For instance, strategies like ‘Maximize Clicks’ and ‘Target Cost-per-acquisition (CPA)’ can help control your CPC. You can always enlist the help of an     ecommerce PPC company if you’re unsure how to switch bidding strategies.

Consider long-tail keywords

Long-tail keywords – longer and more specific keyword phrases – are generally less competitive, leading to lower CPCs. They also tend to attract more qualified leads, which can help when it comes to improving your conversion rates.

Optimize your ad schedule

By analyzing the performance of your ads across different times of the day and week, you can identify when your ads perform best. Adjust your bid modifiers to bid more aggressively during high-performance periods, leading to better results and potentially lower CPCs.

Use Geo-targeting

If your ads perform better in certain geographic locations, consider adjusting your bids to focus more on these areas. This strategic move can result in a lower average CPC and higher conversion rate.

Understanding average cost

While average CPC gives an idea of the cost efficiency of your clicks, understanding the average cost is also crucial. It provides a more comprehensive picture of your ad spend by considering the total cost of your ads, irrespective of whether they resulted in a click or not. 

Understanding your average cost helps ensure your budget is being spent wisely. If your average cost is rising but your average CPC and conversion rates are steady, it might suggest that your ads are being shown too often to the wrong audience, leading to wasted impressions. 

You can lower your average cost by refining your targeting to ensure your ads reach the most relevant audience. Consider leveraging demographic targeting, remarketing, or interest-based targeting to reach users who are most likely to engage with your ads.

The bottom line

In the complex world of pay-per-click advertising, understanding metrics like average CPC and average cost is crucial. They not only provide insight into how much your business is paying for its Google Ads but also indicate the efficiency and effectiveness of your campaigns. 

Understanding these metrics is the first step; the next is using this understanding to optimize your campaigns. By continually refining and adjusting your strategy, you can ensure your advertising budget delivers the maximum return on investment. Remember, while these metrics are important, they should not be viewed in isolation. Always consider them in the context of other performance metrics such as CTR, Quality Score, and conversion rate.

Article by:

Joshua George is the founder of ClickSlice, an SEO Agency based in London, UK.

He has eight years of experience as an SEO Consultant and was recently hired by the UK government for SEO training. Joshua also owns the best-selling SEO course on Udemy, and has taught SEO to over 100,000 students.

His work has been featured in Forbes, Entrepreneur, AgencyAnalytics, Wix and lots more other reputable publications.