What is Cost per Click (CPC)?

How CPC works.

Cost per Click, or CPC, is the amount you bid or pay each time someone clicks to go to your website from a search engine. The higher the bid for each click, the more times you will get placed at the top of the results.

Cost per click advertising is one of the most popular forms of advertising on the Web. Created by Overture in June 1998, CPC allows businesses to bid against each other for the top spot on the search engine results page, under a special heading, such as “Sponsored Links”. Also known as pay-per-click advertising, this method provides a win-win situation for all those involved. Consumers access companies that are providing specific products and services. Businesses only pay to reach a targeted audience — one more likely to buy. And search engines providing this service profit every time a link is clicked. Usually, companies that use this form of advertising report positive results, mainly because they are not spending money on advertising that may be reaching non-targeted prospects.

How CPC Works.

Consumers who are looking for something specific, for example Web hosting, go to a search engine and type in their query. Included with the results is a list of “Sponsored Links” (on the right-hand side and at the top), which lists companies that offer Web hosting services. The consumer gets a specific company selling exactly what they are looking for.

The ad appears after businesses create their listing (description and URL); choose keywords (words that apply to the listing); and a bid (amount paid per click). The highest bidder usually moves to the top of the list, however you are not charged unless a targeted consumer clicks on the link. Some believe that remaining the number-one ranked company in the free search engines should be enough, without having to pay for a higher position. However, studies have shown that unless a business appears in the top 10 listings, chances are the consumer will never find it. They will click on those that appear within this frame, and most often will settle for a company's competitor. That is why having a sponsored link is very important - ensures that whomever is conducting the search will find the Web site.