What is CPC (Cost Per Click)? – Definition
CPC (also known as actual CPC) is the final amount you need to pay per click on your link or banner ad.
It often differs from the maximum CPC, which is the highest cost you declare you are willing to pay per click.
How CPC is Working?
During an auction in Google Ads, you will pay the lowest possible ad cost that is required to reach the ad rank threshold and to outrank your competitors’ ads. This means that if the maximum CPC is set at $1 and the competitive ad is set at $0.40, then in a given auction your CPC (actual cost per click) will be $0.41. If you would like to learn more about Ad Rank thresholds, visit the official Google Ads Help website.
Remember that this rule only applies to a specific billing model. For more on the other billing models available, read the post about Google Ads costs on the Delante blog.
What Has an Impact on CPC (Cost Per Click)?
The ad rank is determined by, among other things, ad quality (e.g., ad relevance, landing page quality score, or expected CTR), maximum CPC set, ad extensions or ad formats. The rank is then used to determine where the ad will appear, as well as the types of extensions displayed with it. It may also happen that the ad doesn’t appear at all because it didn’t get the right score in the rank to achieve that goal.
There are up to four ad positions in Google to display ads in the search results. Five advertisers (A, B, C, D, E) enter the auction. The competitors’ ad rank is as follows: A: 5, B: 8, C: 12, D: 20, and E: 30. Let’s assume that the minimum required rank to display an ad is 10. So only three advertisers meet this condition (C, D, E). Advertisers will pay only $0.01 more for their ad than the competitor below. If competitor E has set the max CPC at $1, competitor D at $0.90, and competitor C at $0.65, then competitor C will pay $0.65, competitor D: $0.66, and competitor E: $0.67.