How costs are calculated in PPC ?

Hello Friends

As a Digital marketing Expert with great two year experience, I am sharing my opinion about the importance of PPC or Google AdWords for business promotion.Because i am doing PPC or Google AdWords, so i can understand its importance for business.

Every time someone searches on Google, AdWords runs an auction to determine the ads that show on the search results page, and their rank on the page. To place your ads in this auction, you first have to decide what type of customer action you'd like to pay for.

For example, you might choose to pay for the following actions:

• When someone clicks on your ad (cost-per-click or CPC)
• How frequently we show your ads (cost-per-impression or CPM; available for Display Network campaigns only)
• How many conversions you receive (cost-per-acquisition or CPA)

These are called your bidding options. Most people starting out in AdWords use the basicCPC bidding option, which means they accrue costs based on the number of clicks they get on their ads.

If you use this option, the amount you're charged per click depends in part on themaximum cost-per-click bid you set in your account, also called maximum CPC bid. This represents the highest amount that you'll ever pay for an ad click (unless you're setting bid adjustments, or using Enhanced CPC). In fact, you'll be charged only the amount necessary to keep your ad at its position on the page.

Example

Let's say you've set a maximum CPC bid of $1 for your ads. The most you'll pay when a customer clicks your ad is $1. You'll often pay less than your maximum bid, though, because with the ad auction you pay no more than what's needed to rank higher than the advertiser immediately below you. The amount you pay is called your actual CPC.

AdWords essential

The auction: how Google decides which ads to show and their order

Control your costs

Now that you understand the basics of how costs work in AdWords, let's look at the ways you can control your costs:

Set a daily budget to control how much you spend

Your daily budget specifies the amount you're willing to spend each day, on average, for each ad campaign in your account. The size of your budget is entirely up to you and you can edit this amount whenever you like. Recall that when you set your max CPC bid, the amount you're charged for a click on your ad in a given auction could be less than your max. This means the amount you pay for a click on your ad - your actual CPC - will likely vary from auction to auction. Even though your actual CPCs may vary, your daily budget puts a limit on how much you can accrue in click costs from day to day.

Google may allow up to 20% more clicks in a day than your daily budget specifies. We call this overdelivery. Overdelivery can help make up for days when traffic is slow and your ads don't get as much exposure. However, in a given billing period, you're never charged more than the average number of days in a month (roughly 30.4) times your daily budget.

Example

If the budget for your ad campaign remains at $10 per day throughout an entire month, the maximum amount you would be charged for that campaign for that month is $304 ($10 x 30.4 average days per month).

Fine-tune your bids

If you use the cost-per-click bidding option, you set a maximum CPC bid for your ads. You can always lower your bid amount, but if you do, it may cause your ads to show up in a lower position on the first page of search results, to move from the top to the side or bottom position, or to be removed from the first page search results. In general, a higher maximum CPC bid can allow your ad to show at a higher position on the page.

Tip

You can have your bids automatically updated, based on the daily budget you've set. Then the system will actively seek out the most clicks possible given your budget. This option is called automatic bidding.

Create more relevant ads to get the most for your money

High-quality keywords and ads are an important way to make sure that you're getting the most for your money.

You can raise your maximum CPC bid to try to get your ad to show at a higher position on the page. But you can also raise your ad's position by improving the quality of your ads, keywords, and settings, without increasing costs.

To encourage high-quality ads, Google uses a measurement called Quality Score. The higher the quality of your ad, the less you pay for a given ad position, and vice versa.

Example

Let's say your maximum CPC bid is $2. Meanwhile, your competitor has a maximum CPC bid of $3 but the quality of his ads are below average. Because of the higher quality of your ads, your ad could actually show in a higher spot on the page, even though your bid is lower.

All content and resources from Google