What is CPC?
CPC, or cost per click, is the average amount you pay each time someone clicks one of your ads, found by dividing spend by clicks.
Formula
CPC = ad spend ÷ clicks
Worked example, not a result
One average covering two very different groups
Say a campaign spends 875 in a week and receives 1,250 clicks. Average CPC is 0.70.
Open the campaign and the average splits in two. One group of search terms, the ones naming a specific product and model, costs 2.10 a click and brought 190 clicks that produced 4 orders. Another group, made up of broad category searches, costs 0.45 a click and produced almost nothing.
The expensive clicks are the good ones here. They cost three times more each and are the only reason the campaign made money. A store that reacted to the average by pushing bids down across the board would have removed the profitable half and kept the cheap half.
That is the whole lesson of CPC. It is an outcome, not a control. What you actually manage is which searches you appear for and how well your listing matches what those searchers want.
The figures here are made up for the example.
Why it matters
CPC is the price of the visitors lever. Combined with conversion rate and average order value it decides whether paid traffic can work at all, because cost per click divided by conversion rate is your cost per order, and that has to sit below the contribution an order leaves behind.
That relationship is the useful part. You cannot control what competitors bid, but you can control the other two numbers. A better product page lifts conversion, so the same click price buys cheaper orders. A higher average order value raises what a click is allowed to cost. Both do more for a struggling account than any bid adjustment.
For a store owner, CPC is worth reading by search term and by product group rather than as an account average. A rising average is often a change in what you are showing for, not a change in the market, and the fix is in the feed or the keywords rather than in the bid.
Common mistakes
- Judging an account by whether clicks got cheaper. Cheap clicks from people who were never going to buy are the most expensive traffic a store can have.
- Pushing bids down to defend an average. Lower bids move you down the page, and lower positions often convert worse, so cost per order can rise while cost per click falls.
- Ignoring the search terms behind the number. Most sharp rises in CPC come from matching to broader or more competitive queries, which is a targeting and feed problem.
- Comparing CPC across channels as if it were the same thing. A click from someone searching for your product and a click from someone scrolling a feed have very different intent, and paying more for the first is usually correct.
Related terms and answers
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