Glossary
The price of a visitor.
CPC is what one paid visitor costs you — the money you gave the ad platform, divided by the clicks it sent back.
CPC = ad spend ÷ clicks
cost per click $1.20
conversion rate 2%
at $1.20 a click and 2% conversion, one order costs $60 of ads.
The billing model
CPC belongs to the PPC family — pay per click, the model where the platform charges you nothing to be seen and something to be visited. PPC is the billing model; CPC is the number on the invoice. You rarely set it directly: an auction does, moved by how many competitors want the same shopper and how relevant the platform judges your ad to be. The other way to buy is CPM — paying for a thousand impressions whether anyone clicks or not — which leaves the risk of a dull ad with you instead of the platform. The two prices are linked through CTR: an ad that earns more clicks from the same impressions ends up with cheaper clicks.
Nothing without conversion
A click is not a customer. Divide CPC by your conversion rate and you get the ad cost of one order — the figure above. That is the number to judge a channel by: a $3.00 click converting at four percent costs $75 an order, while a bargain $0.60 click converting at half a percent costs $120. Cheap traffic that does not buy is the most expensive kind. The per-order cost is also the backbone of CAC — if paid ads are your only acquisition channel, it is your paid CAC — and ROAS is the same judgment made from the revenue side. Push CPC down where you can, but the bigger lever usually sits on your own site: the click price is set at auction, the conversion rate is set by you.
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