Cost per click: What is it and how is it calculated?

Running ad campaigns is a key part of any digital marketing strategy. Whether it’s social media adverts, banner ads on websites or a PPC (Pay Per Click) campaign, running ads can have a major impact on your business, helping you to reach a much wider audience.

One of the key parts of an ad campaign is sticking to your budget. It can be easy to get carried away, and before you know it you’ve blown your whole marketing budget on one advert. Keeping an eye on your cost per click is essential if you want to get the best value for your money. Here we explain what it is, how it’s calculated and how you can keep it as low as possible.

Cost per click is a bidding model where an advertiser pays each time their ad is clicked on. Cost per click is the amount of money that each click costs.

When running any kind of PPC (Pay Per Click) or social media ad campaign, it’s crucial that advertisers keep a close eye on key metrics in order to keep costs down and reach as many potential customers as possible. Cost per click is one of those metrics.

Cost per click offers digital marketers insight into both how much each click is worth and how much they’re paying.

Ads that include a cost per click markup can run across various platforms including social media, websites and Google. For instance, when you make a Google search some search terms will produce paid for results ahead of organic results in the SERPs. These advertising spots have been bid on by businesses who will be paying a cost per click fee each time a user clicks on their result.

Social media adverts or website advert banners work in a similar way. Every time a user clicks on the advert, the business pays a cost per click fee.

There are two main cost per click advertising models:

• Fixed price per click
• Price per click based on bidding

For a fixed price per click model, the advertiser or marketer will agree to a price with the platform the advert is running on prior to them creating and setting the advert live.

The most popular option, however, is the bidding model. This works like an auction where the advertiser will bid the highest amount they are willing to pay per click. The higher your cost per click bid, along with your quality score (the quality of your ads and landing pages), the more likely it is that your advert will be placed.

For PPC campaigns, your advert will be shown each time a user searches for a keyword that matches the keyword list you defined prior to placing the advert. You only pay when a user clicks on your ad, visiting your website or wherever you’ve opted for the ad to lead, and not every time the advert is shown to a user.

The cost per click fee for these adverts varies from industry to industry. The cost is higher for industries such as law, finance and insurance due to the high levels of competition.

The principle remains the same for cost per click ads that are run as website or social media banners. You only pay when a user clicks on your advert. Cost per click adverts are a great option for businesses who are looking to keep a tight watch on the costs within their digital marketing strategy.

It’s important that you pay attention to your cost per click, as it is the key way to ensure your ad campaign stays within your budget. It’s not just about the cost though, you also want to ensure that the value behind the clicks is high. Like any form of marketing, you want to ensure that you’re targeting the right audience who are likely to convert.

When it comes to Google adverts, there is a precise formula that the search engine uses in order to determine the cost per click. That formula is:

The ad rank of your competitor / Your quality score + $0.01

Your exact cost per click will depend on the platform you’re placing the ad on, as well as specific features that individual platforms factor into account.

Whilst Google takes into account the maximum bid you are willing to make, along with ad rank and quality score, social media platforms such as Facebook and Instagram determine your cost per click based on the placement of your advert and how relevant it is to your target audience. When placing a social media advert, you will also need to decide how much you are willing to pay for specific actions such as views, clicks and conversions. When bidding you will need to set the amount you are willing to pay every time a user undertakes a specific action on your ad.

The average cost per click price differs from platform to platform; you can find the average price for each platform below.

• Facebook – $0.97 per click
• Twitter – $0.38 per click
• Instagram – $3.56 per click
• LinkedIn – $5.26 per click
• YouTube – $3.21 per click
• Pinterest – $1.50 per click

Keeping costs low is often a crucial part of a digital marketing strategy. Businesses have budgets and they need to be stuck to without sacrificing the value of the marketing campaign. So, how can you try and keep your cost per click low?

Keep your ads relevant – When it comes to running cost per click ads you need them to be relevant to your target audience. If not, then users won’t engage with the advert – plus, the higher your ads engagement rate, the lower your cost per click will be.

Know your audience – In order to prompt ad engagement, you need to know your audience. Take the time to hone in on the key demographics you want to target. Think about their age, gender, marital status and buying habits; all things that will impact how they engage with your advert.

Include a call to action (CTA) – It is all well and good people seeing your advert, but it will offer you little value unless they engage with it. Including a call to action is a great way to encourage users to take the next step. Think about how you can interest users with your CTA. Rather than a simple ‘click here’, make it more exciting and clear what the next step will offer them – such as ‘download our free eBook’ or ‘visit our website for 20% off’.

Here at Social Chameleon, we’re trusted by businesses of all shapes and sizes and with all different budgets to implement a digital marketing strategy that works. Our team of digital experts run ad campaigns that stay within budget, are relevant and most importantly, that convert.

Get in touch with us today to find out more by emailing contact@socialchameleon.com or by filling out the enquiry form on our contact page.