What is cost per click (CPC)?

Cost per click (CPC) is how much you pay for each click on your ad. In other words, you won't pay for displaying your ad, but only when a user clicks on your ad. 

It’s a core component of pay-per-click (PPC) advertising and is widely tracked in e-commerce marketing strategies to determine your campaigns’ performance and cost-effectiveness. When you’re running Catalog Ads, lowering your CPC without hurting performance often involves better creatives and more relevant product recommendations.

How do you calculate CPC?

To work out your CPC, you generally divide the overall cost of your ad by the number of clicks the ad generated. 

For example, if you spent $1,000 on ads that generated 5,000 clicks, your CPC is $0.20.   

Why is CPC important in e-commerce?

Your CPC matters because it directly impacts your customer acquisition cost ( CAC). The lower your CPC, the less you’re paying to direct visitors to your online store. This, in return, affects your return on ad spend ( ROAS) and profit margins. A high CPC will lower your profit margins. 

Tracking your CPC also helps you to measure campaign efficiency and identify your best-performing ads. It will give you feedback into whether you’re targeting the right audience and if your Catalog Ads appeal to them.   

Which factors can impact your CPC?

Competition

Platforms like Google use auction-based pricing models where advertisers need to bid against each other to have their ads shown. As such, your CPC will be higher if you’re targeting competitive and popular keywords.  

Ad relevance

Platforms reward ads that have high-quality images, accurate product data, and relevant descriptions by lowering their CPC. It’s part of the strategies platforms use to offer a good experience so that users will engage more with the ads. What’s more, if your ad is relevant and matches search intent, you can also expect a higher click-through rate (CTR) which platforms also use as a signal to lower your CPC. 

Product price and margin

Product price and margin don’t directly impact your CPC on ad platforms, but they will impact your bidding strategy. If you’re advertising products with high profit margins, you can afford a higher CPC and can bid more aggressively while still remaining profitable. On the other hand, if you’re selling low-margin products, you’ll likely avoid bidding on competitive keywords. 

Best practices in measuring CPC

Apply segmentation

Segment your CPC by: campaign, creatives, location, device type, time of day, and individual keywords. Armed with this information, you can then identify which segments are the most cost-effective. 

Monitor changes daily or weekly

It’s best to monitor the CPC of active ads, high-spend, or new campaigns daily, while low-budget or well-optimised campaigns can be tracked weekly. This way, you’ll be able to spot sudden increases which could point to rising competition or ad fatigue allowing you to adjust quickly.   

Track in conjunction with other metrics

When you’re measuring your CPC, it’s key that you track it alongside other key metrics like CTR, conversion rate (CR/CVR), and cost per acquisition (CPA). While your CPC might be low, it’s only valuable if you have a high conversion rate.