Cost Per Click - CPC

What is a 'Cost Per Click - CPC'

Cost per click (CPC) is a method websites use to bill based on the number of times a visitor clicks on an advertisement. The alternative is cost per thousand (CPM), which is the number of impressions, or viewers, in thousands, regardless of whether each viewer clicks on the advertisement or not.

BREAKING DOWN 'Cost Per Click - CPC'

CPC is often used when advertisers have a set daily budget. When the advertiser's budget is hit, the ad is removed from the rotation for the remainder of the billing period.

For example, a website that has a CPC rate of 10 cents and provides 1,000 click-throughs would bill $100 ($0.10 x 1000). The amount that an advertiser pays for a click is usually set either by formula or through a bidding process. The formula used is often cost per impression (CPI) divided by percent click-through ratio (%CTR).

CPC is the amount that a website publisher receives when a paid advertisement on the site is clicked. Business is increasingly done online, and advertising is following. Global online advertising generated an estimated $170.5 billion in 2015. Publishers usually look to a third party to match them with advertisers; the largest such entity is Google AdWords.

Google AdSense

Web site publishers can contract with Google to place ads on their site. The ads can contain a combination of text, images or videos. Google decides what type of ads to run on a given site, based on the amount of traffic that it receives, the type of content or subject matter, and the number of advertisers interested in the material.

The publisher is paid based on the number of times viewers click the ad; the amount paid per click is that ad's CPC. Advertisers bid how much they are willing to pay for each click, and Google uses complex algorithms to match publishers and advertisers. Sites with the largest number of unique visitors and that incorporate the most valuable keywords receive the highest CPC. The auction for ads is dynamic and continuous, so CPC changes constantly.

Alternatives Emerge

Small publishers find it very difficult to make money via Google AdWords. It can be difficult to meet the criteria to join the program, and even if accepted, the minimum payout of $100 is beyond the reach of many.

As digital currencies such as bitcoin become more mainstream, so-called peer-to-peer (P2P) networks are using blockchain technology to move into online advertising. The best known is BitTeaser, which debuted in January 2015. It charges and pays in bitcoin and accommodates far smaller users, CPCs and payments than AdWords.

RELATED TERMS
  1. Cost Per Thousand - CPM

    The price of 1,000 advertisement impressions on one webpage. ...
  2. Advertising Appropriation

    The portion of the total marketing budget that is allocated to ...
  3. Impression

    A metric used to quantify the display of an advertisement on ...
  4. Click Fraud

    Click fraud is the act of illegally clicking on pay-per-click ...
  5. Qualifying Transaction

    A type of transaction that occurs when a company issues public ...
  6. Flighting

    An advertising scheduling strategy in which a business alternates ...
Related Articles
  1. Professionals

    How The Internet Web Ad Industry Works

    Over the past 10 years, advertising strategies have evolved as a result of technological development as the internet has provided new channels for advertisers to reach a larger audience.
  2. Professionals

    Bye, Mad Men: How the Net Is Changing Advertising (FB, TWTR)

    The Internet and digital media are changing the way companies advertise and market themselves. More targeted, varied and faster advertising is possible.
  3. Professionals

    Trends And Growth In The Digital Advertising Industry

    The rapidly expanding digital advertising industry is leading a shift towards content and demanding forced innovation.
  4. Entrepreneurship & Small Business

    How is Programmatic Advertising Changing Media?

    Understand what programmatic advertising is as well as the technology that drives it. Learn about the top four ways programmatic advertising is changing media.
  5. Professionals

    Advertising From TV To Internet: An Industry History

    Changes in television consumption habits have forced advertising to target audiences through new means, namely Internet advertising.
  6. Investing

    How Google Makes Money

    While best known for its search engine, Google's revenue mainly comes from advertising. Here's how the firm uses its stature and technology to make money.
  7. Investing

    How Google's Search Engine Makes Money

    A deep analysis of how Google's search engine and related services have made it one of the biggest companies on the planet.
  8. Entrepreneurship & Small Business

    The (High) Cost of Advertising in Times Square

    Advertising on a Times Square billboard costs more per impression than similar forms of advertising, but that doesn't mean it's not worth it.
  9. Professionals

    Why Facebook Is Free to Use (FB)

    Learn why Facebook is free to users, and understand how the company makes more money by charging advertisers than it would if it charged users.
  10. Insights

    How the TV Advertising Industry Works

    Things have definitely changed since the early days of “Mad Men,” when one TV ad could change the world—or at least change a company’s sales numbers.
RELATED FAQS
  1. What are the key differences between marketing and advertising?

    Understanding the role advertising plays in the marketing mix will help business owners define their promotional strategies ... Read Answer >>
  2. How important is advertising revenue in the Internet sector?

    Learn about the importance of advertising revenue in the Internet industry. Find out how much Internet firms rely on advertising ... Read Answer >>
  3. Why does an investor need to understand the click-through rate in the Internet sector?

    Understand what a click-through rate measures, and learn why an investor should be interested in the click-through rate of ... Read Answer >>
  4. How do people make money on the videos they upload to YouTube?

    Learn about the primary ways that people can generate income based on the videos they upload to YouTube, including advertising ... Read Answer >>
  5. How do Internet companies profit if they give away their services for free?

    Learn how companies in the Internet sector make a profit when service, content and user applications are offered at no cost ... Read Answer >>
  6. Michael Feinberg sends a memo to his star investment advisor ...

    The correct answer is a). Consider the intended target audience when deciding if a communication constitutes advertising. ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center