Cost-Per-Click (CPC): What Is It & How to Calculate

by The MNTN Team

5 Min Read

Pay-per-click (PPC) campaigns are a staple of performance marketing. Only paying for when someone interacts with your ad content is a great means of retaining control of your marketing budget and tracking spending. However, you can’t see the entire PPC picture without measuring your cost-per-click (CPC).

Calculating CPC helps you assess the cost-effectiveness of your campaigns by showing how much you are paying for each ad click. Below, you’ll learn what CPC is and discover actionable insights to help you make the most of every advertising dollar.

What Is a Cost-Per-Click (CPC)?

Cost-per-click refers to the price you pay every time someone clicks on your online ad. Facebook, Google Ads, and other digital advertising spaces all use this popular pricing model, making it one of the most widely used digital marketing metrics.

Within the pay-per-click model, you’ll bid for placements, and each time a user clicks on your ad you’ll pay a specified amount. That amount is your CPC, meaning it measures the cost of driving traffic to your website or landing page. The lower your CPC, the further you can stretch your advertising budget.

Importance of Cost-Per-Click

Your cost-per-click directly impacts your budget and overall campaign performance. If you can keep it low, you can reach more prospects with a finite budget. Managing your CPC also ensures you’re not overspending to achieve a certain amount of impression and lead-related goals.

How to Calculate Cost-Per-Click

Calculating CPC is simple and can be done with basic data from your advertising campaigns. All you need to know is how much you’ve spent on a campaign and how many clicks you’ve received.

CPC Formula

CPC = Total Cost of Campaign / Total Number of Clicks

An Example of How It’s Used

Let’s say you’re running a pay-per-click campaign for an online clothing store. Over a month’s time, you spend $1,000 on Google Ads and generate 2,000 clicks to your website. Using the CPC formula, you can determine that your cost-per-click is $0.50.

With that information, you can then assess whether your CPC is cost-effective based on how many of those clicks turn into purchases and how much revenue you generate.

What Is a Good Cost-Per-Click?

A reasonable CPC depends on your industry, conversion rate, and how much money you generate from each sale. Some industries have a higher CPC because they are extremely competitive or very lucrative. The legal and finance sectors have some of the highest average CPCs. For instance, it’s not uncommon for personal injury attorneys to pay $150 to $300 per click.

So what’s “normal” for your industry? If the average is $2 per click and you are paying less than that, your campaign is efficient. If you are spending more, you need to figure out why so you can make better use of your advertising budget. In general, though, the lower your CPC, the better, because it means you’re getting more bang for your buck.

The quality of those clicks, however, is just as important. It doesn’t matter if you are paying $0.10 per click if your conversion rate is still abysmal. On the other hand, a high conversion rate will be offset by an abnormally high CPC. Ultimately, you need to balance your CPC with other metrics to ensure your advertising dollars are being well spent.

Strategies to Improve Cost-Per-Click

If you’re looking to spend less per click, here are some tips to help:

Produce Better Ads: Review and revamp your ad copy and creative to increase your ad’s Quality Score
Use Negative Keywords: Use negative keywords to prevent your ad from showing up in irrelevant searches (if you sell eyeglasses, for example, you’ll want to use the keyword “glasses,” but exclude “wine glasses”)
Optimize Your Bidding Strategy: Automated bidding strategies can help optimize your ad spending in real time
Refine Your Targeting: Use Connected TV platforms like MNTN Performance TV to raise your brand awareness and reach more relevant audiences

If you only want to ensure consumers are familiar with your company and products, you should focus on raising brand awareness. But MNTN Performance TV can help you go a lot farther, increasing the efficacy of your CPC-driven campaigns by both connecting with your audience on CTV channels and optimizing your campaigns to perform their best.

Cost-Per-Click (CPC): Final Thoughts

Understanding CPC will play a key role in optimizing your ad spending and running cost-effective campaigns. But don’t forget to balance your cost-per-click with other metrics to ensure those clicks convert into meaningful revenue for your business.Learn more about CTV advertising and OTT advertising — and learn how MNTN can help you achieve your business goals in the process.