CPC — Cost Per Click Metric
Is your profit margin an enigma? Even though cost is essential to any sort of profit equation, you'd be shocked at how many businesses operate their online ventures in the dark.
Do you know how much online leads are costing, or how much each new online customer costs? Before answering either of these questions, you've got to determine what you're paying or how much you are willing to pay for each online visit.
The (CPC) – Cost Per Click, is the first step towards gaining financial clarity and control over your online endeavors.
You will need to set up Google Analytics or another program to track and segment the sources of your traffic. Each traffic source has its own associated costs, and figuring out your CPC Cost Per Click will largely depend on the payment model of your advertising channel.
PPC – Pay Per Click
Used by Paid Search Marketing like Ad Words
CPM – Cost Per Mille (Thousand)
Commonly used by Display (Banner) Advertising like Facebook
Mixed Cost Channels
Mixed Cost are incurred by a variety of Marketing Channels like Organic Search
The PPC Paid Search Formula
To set up a PPC Campaign, you first need to establish the price that you're willing to pay by bidding on a selection of carefully chosen Keywords. Because the keywords have different rates, you'll need to the average cost to calculate the CPC Cost Per Click of your Paid Search Campaign.
The average CPC is calculated by dividing the total cost of your clicks by the total number of clicks.
Paid Search is extremely competitive and accounts for nearly 97% of Google's annual revenue.
The CPM Cost Per Mille Formula
The CPM Cost Per Mille payment model was inherited from traditional media, like Television, Print, and Radio. Why the Roman numeral ‘M' is used instead of a ‘T' for thousand, is anybodies guess.
Clicks have nothing to do with the CPM, which is determined by the cost per thousand. Each thousand impressions, the amount of times your ad pops up on the screen, is one CPM Unit.
The formula to used to convert your CPM to CPC Cost Per Clicks involves some basic math.
CPC = ((Total Impressions x CPM)/(Total Number of Clicks)
The cost per thousand (CPM) multiplied by the total number of impressions gives you the total cost of your CPM. Now that you have the total cost, divide it by the total number of clicks and this will give you the CPC Cost Per Click.
If you're not mathematically orientated you the following example might be easier to understand, or just use an Online Converter.
Lets say that you're paying $10.00 (CPM) per thousand impressions. If you get 10,000 impressions, then your total CPM would be $100.00.
Now, if out of those 10,000 impressions you get 100 Clicks, then you'll divide the total cost of $100, by the total number of clicks 100. This would give you a CPC Cost Per Click of $1.00.
The Mixed Cost Formula
The first two models provide a performance totals and a fixed cost rate that just needs to be converted into CPC units. However, for the Mixed Cost Formula, you'll need to go a step further and set up tracking and sum up the cost into an aggregate total.
This involves digging a little deeper into your analytic data. Yet, before we get down to the nitty-gritty, I'd like to clear up a pervasive fallacy.
Some of you may have come across some hot shot selling a bag of free traffic secrets, or something of the like. The common misconception that organic traffic is free, is a gross misnomer. No matter what you may have heard, the only traffic that's free is bumper to bumper on the freeway.
Don't you agree that it's time to shine a light on the hidden costs of those visits. Without knowing how much your paying and how each marketing channel is fairing, how could you ever hope to increase performance and maximize your investment?
To figure out the CPC for Organic Traffic and inbound marketing channel, you need to know the volume of traffic, the number of visits generated by each channel.
In Google Analytics, the referral sources for all your traffic are listed under the Acquisition Panel. This panel is one of the most popular sections of Google Analytics and will provide you with a treasure trove of useful data and customization options.
If you'd like to learn more, here's a great article about Google's Acquisition Reports.
There is a problem though, towards the end of 2013 the evil Mr Google stopped providing the Keyword Data for organic search.
This means that finding out what keywords your visitors were searching for, the search queries that brought them to your website are no longer readily available on Google Analytics.
The good news is that you still have that data you need to calculate the CPC for content marketing channels, like Video SEO, Infographics, Articles, or as you'll see in the following example, Media Releases.
CPC Media Release Example
So excluding set up and operational costs, lets say you invest a $1000.00 for a Global Media Release that generated 10,000 visits to your website. By dividing the number of visits (10,000) by the cost of the Media Release ($1000.00), you're able to determine that the cost of each visit was 10 cents.
Now lets say that the (CPC) – Cost Per Click of a (PPC) Google Adwords Campaign was $1.00, then the same 10,000 visits would cost you $10,000 instead of $1000. So in terms of traffic cost, the Global Media Release out performed Google Adwords by 1000% percent.
In the future, I do plan on updating this section with a real world example of a CPC Calculation on a Video SEO Campaign.