Use our handy PPC Calculator below to work out how much you are paying for clicks. You can also derive the number of clicks or ad spend you would need to hit a target PPC. If you want to know how to calculate your PPC, feel free to experiment with our Pay Per Click calculator.
Why not try out some different scenarios in order to help you understand this pricing model better?
What is PPC?
PPC stands for Pay Per Click and is the amount you pay for each click. It is also the name of one of the oldest types of advertising. For a long time paid search ads were charged on a PPC basis, so PPC has become synonymous with paid search. Paid Search however now supports many ad payment models, so PPC is no longer a useful description. PPC is however still an option for almost any type of online advertising.
When buying display ads, paying per click is often a good payment model for advertisers to use. This is because results are simple to understand, predictable, and guaranteed. However, PPC advertising is generally not that profitable for website owners, as it can be hard to get people to click on ads.
If you are selling ads on a PPC basis, this means a payout is triggered every time an ad is clicked on. If you are buying ads by the click, PPC is also sometimes referred to as CPC advertising (which stands for Cost Per Click). There is actually no real difference between CPC and PPC however.
PPC can also be used as a measure of how much clicks have cost when you are using different ad pricing models.
How to Calculate PPC
The Pay Per Click equation is:
PPC = Amount Paid ÷ Clicks
Paying for clicks is often cost-effective when you are starting out, but when your CTR starts getting better then a CPM rate can be better. Check out this example to understand why this occurs:
Ad ONE – Paying on a PPC basis ($1 per click): 20,000 impressions and 80 clicks costs $80 (PPC=$1)
Ad TWO – Paying on CPM basis ($3 per 1,000 impressions): 20,000 impressions and 80 clicks costs $60 (PPC=$0.75)
In the above example, both campaigns are exactly the same except for how they are paid for. While paying $1 per click might feel like a better deal than paying $3 per 1,000 impressions, the above shows why it is not.
The Pay Per Click campaign costs more in total, however – and actually also costs more per click. If the CTR was higher, the CPM campaign would actually even better value. This is because the higher the CTR, the more clicks you get per 1,000 impressions (and therefore the more clicks you get for your ad spend). With a PPC deal, you get the same amount of clicks no matter how effective your ads are.
Therefore when you start out advertising and have a low CTR you should use PPC ads. Once your ads performance improves, you should move to CPM advertising. To work out when this tipping point occurs, see here.
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