In this post, we’ll break down the difference between PPC and CPC, describe how they work and provide examples of their usage in real-life working scenarios.
First, let’s discern the PPC from CPC
PPC is an abbreviation of the term Pay Per Click which is often used within online advertising platforms such as Google and Facebook. This refers to the method of paying for the ads being served to users on a click by click basis.
In comparison, CPC is an abbreviation which refers to the Cost Per Click of the advertising within the platform itself. An example where you would use both terms in a sentence would be, “We are running PPC ads on Facebook and are aiming for an average CPC of $0.80”.
How does PPC work?
To answer this question, it really depends on which advertising platform you are using. We’ll discuss PPC ads for the largest advertisers, namely Google, Facebook and Amazon.
Google PPC ads
When people mention PPC, it’s usually synonymously associated with Google Paid Search. This is because Google is the largest advertising platform in the world and is usually the default option when a business is considering online advertising.
Google Search Ads are served based on the keyword or search term a user types in the Google Search bar. Keyword research is a tactic that advertisers use to analyze the most appropriate keywords to bid on, based on their budget, product and industry.
The ads themselves are usually in two formats:
1. Search ads which have a large variety of B2C and B2B business types
- Paid Search ads generally perform better than organic search
- Google owns the majority of search engine market share
- Automation is enhancing the way in which advertisers optimize bid management
2. Product Listing Ads (PLA) for e-commerce, predominantly B2C
- Google Shopping Feed is required to pull product information
- Managed through Google Merchant Centre and Google AdWords
- Generally, lower value items have a higher chance for immediate purchase and perform better than high ticket items
In both instances, advertisers would pay Google each time someone clicks on their ads using the CPC payment model. The CPC is determined via a live bidding auction where advertisers influence the cost for each click. The cost per click (CPC) ranges from industry to industry as per below.
Generally, the most popular and competitive industries have the highest CPCs. The gambling industry as an example, has some of the highest CPCs followed by finance.
Facebook PPC ads
Facebook PPC, like Google, is based on an auction of bids. The cost of each click is based on how many people you can reach and how competitive it is to reach this audience. When marketing on facebook, you’re aiming to maximize Reach and not Search Volume.
The ad that wins an auction would have the greatest value on a combination of the following factors:
- Estimated action rates
- Ad quality and relevance
You go through a step by step process of selecting your:
- Ad format
Facebook ads come in many varieties, examples are:
- Link click ads
- Video ads
- Page post ads
- Dynamic product ads
- Facebook lead generation ads
- App ads
- Event ads
- Offer claims ads
As you can see, there are a lot of different variations of ads to choose from.
The key difference between Facebook and Google ads is that with Facebook you can leverage the additional demographic targeting options available. User data is king in the advertising world and Facebook has plenty of it.
For example, you can target people based on
- Purchasing behavior
- Lookalike audiences
- Custom audiences
Facebook or Google PPC?
Google search serves ads to people who are actively searching for products and services, who are therefore more likely to buy. Generally, businesses would consider Facebook for brand awareness and lead generation as opposed to a channel for immediate direct sales.
Facebook ads also have a much lower average CPC when compared to Google.
Amazon PPC ads
According to Fortune, Amazon is now the third largest advertiser online, surpassing Verizon Media’s Oath and Microsoft. The rise of Amazon ad spend has been largely attributed to growth within its advertising platform.
Similar to Google, advertisers can target specific keywords they would like to bid for. Using the PPC model, if any user sees an ad and doesn’t click it, the cost is free. Moreover, due to the transactional nature of the Amazon platform, users are more than likely to have a high intent for purchasing products.
Amazon ads come in the following variations:
- Sponsored product ads
- Headline Search ads
- Product display ads
- Sponsored brand ads
The Buy Box
Multiple sellers can offer the same product on Amazon, so an advertiser may compete with other merchants to appear in the Buy Box. This key feature offers a lot of incentive for businesses to invest in Amazon PPC.
This is the key differentiator that sets Amazon apart from Google and Facebook. Hence why advertisers are quickly realizing the opportunity within Amazon PPC. It’s quickly becoming a default acquisition channel within the B2C marketing mix.
How to calculate CPC
So now you know more about the difference between PPC and CPC. Here’s how you calculate the Cost Per Click:
- How much did the advertising cost? E.g. $500
- How many clicks were gained? 625 clicks
- Divide the cost by the number of clicks e.g. $500 divided by 625 clicks
- The answer is your Cost Per Click (CPC) e.g. $0.80
The advertising platform will be able to show you your CPC at various levels. However, if you’re feeling lazy and don’t have access to the platform, you can use this handy Omni Calculator to calculate your CPC.
Here are some of the different levels of CPC you might want to know:
- Account CPC
- Campaign CPC
- Ad Group CPC
- Keyword CPC
How much does online advertising cost?
The cost of advertising online varies. For example, a small local business can advertise on Google with a budget as small as $500 per month. In contrast, larger national and international firms could have multi-million dollar monthly budgets.
The advantage of PPC advertising and using the CPC model is that you don’t have a minimum spend requirement. Equally, there really isn’t a limit to how much you could spend each calendar month. This means small local advertisers often compete with larger firms.
As an example, savvy Google advertisers will only bid on search terms where they can get the best Return On Advertising Spend (ROAS).
Example of UK Google Ads advertiser with a 11.62 ROAS
If your budget is limited to $500 per month:
- You’re unlikely to bid on search terms that have an average CPC of $10.
- This would mean you could only gain around 50 clicks per month.
- You’d gain one conversion a month with a 2% conversion rate.
What you’d want to aim for is a pool of keywords that have lower competition that suit your advertising budget. You can then ensure your advertising costs are giving you the return necessary for PPC ads to be profitable.
So now you know what all this means, you might want to hire a PPC specialist to help with your PPC campaigns.
What is a PPC Specialist?
A PPC specialist is an online marketer that is familiar with using the various advertising platforms available such as Google ads, Facebook ads and Amazon ads. Their role is to ensure an advertiser’s online marketing campaigns satisfy their primary objective.
Examples of primary objectives for e-commerce and lead generation advertisers include:
- Cost Per Acquisition (CPA) of $50 per lead
- Return on Ad Spend (ROAS) of 4.1x
- 10 qualified leads per month
- $10,000 in revenue per month
- An average CPC of $2.80
These primary objectives could also have secondary objectives attached. However, it’s always best to optimize bids to one main objective to measure the effectiveness of a campaign.
For example, if a PPC specialist needs to maximize clicks to the website, maintaining a low average CPC would be the main objective. However, if it was to maximize ROAS then a higher CPC could sometimes translate into higher revenue being generated for high value keywords and bidding on these higher CPC keywords could lead to a better return.
About the author:
Kevin Kapezi is a well-rounded digital marketer with over 3 years of experience. At Hallam, Kevin’s role is an Owned Media Consultant specializing in SEO, CRO and Content Marketing. He also has previous experience managing a number of PPC campaigns.
Hallam is a multi award-winning, strategic digital marketing agency for brands that want to thrive in the digital world.
Article source: https://learn.g2crowd.com/ppc-vs-cpc