If you're relatively new to the world of PPC and digital advertising, the abundance of acronyms for different terms and metrics may be a little overwhelming. Two of the first terms you're likely come across are PPC and CPC—"pay per click" and "cost per click."
Quick answers are nice, but understanding what those terms mean, how they relate to each other, and what they do and don't include is a slightly longer explanation. However, if you stick with me, you'll get to see some funny GIFs.
What PPC Is (and Isn't)
In short, pay per click (PPC) refers to a type of advertising in which the advertiser pays for each click on one of their ads. This can sometimes be a fixed amount of money per click, but more often it takes the form of a fixed daily budget, with the value of each click fluctuating based on factors like competition and search volume.
The Alternative: Impressions
The alternative to paying per click is paying for "impressions." While impressions can be loosely understood as views, the term technically refers to the number of times the ad is delivered to a page from the ad source, regardless of whether it is actually seen. Impressions are measured by CPM, or cost per 1,000 impressions. Most Google Display Network ads use this system.
The benefit of clicks over impressions is pretty obvious—while impressions don't rely on any kind of action, with PPC, you don't pay unless somebody clicks. Of course, your ultimate goal is another kind of conversion (like a purchase or a form submission), but at least it gets you part of the way there.
The most common form of PPC involves search engines. Platforms like Google AdWords and Bing Ads allow advertisers to bid on keywords that are relevant to their businesses and customer pain points, and the winner's ads appear in or alongside search results.
Individual websites or groups can also host PPC display ads or banner ads, usually through an intermediary like Google. The owners of websites interested in ad income allow Google to place ads in their content in exchange for a portion of the PPC cost.
It's therefore in their interest to bring in more traffic and get more clicks on the ads, while the intermediary is responsible for handling the money, arbitrating ad content, etc. Of course, website owners can work directly with advertisers themselves, but in those cases they usually charge a fixed rate per click rather than using the bidding system.
What CPC Is
CPC, or "cost per click" is a metric that... measures the cost per click. As I mentioned above, that cost will vary based on factors like how much competition exists for the keyword and fluctuations in search volume. If you've been running ads for "Taylor Swift Faceplant" at $0.17 per click and then TayTay falls flat on her face at the VMAs, you'll soon find yourself paying many times that amount. Since the budget is fixed, you won't get stuck with a big bill, but you will burn through your funds much more quickly.
While it's just one part of PPC advertising, CPC is sometimes used to refer to PPC advertising as a whole (as in, "cost per click advertising relies on an agreed-upon fee for each time a viewer clicks the ad"). Technically, this makes it a synecdoche, a word that is definitely overkill in this situation but that I never get to use.
Cost per click can help you weigh how expensive a term is against the relative benefit of getting those clicks. It is useful both as you decide what terms to bid on and when you're calculating your ROI after a campaign is in play.
How the PPC Bidding System Works
PPC campaigns are organized around ad groups, or collections of one or more ads that serve the same set of keywords. In addition to the ad group, a campaign consists of the keyword list and the landing page, and each element of a campaign can be optimized to increase conversions. A single advertiser may be running one or many campaigns at a given time, depending on the scale and needs of the business.
As I mentioned above, most PPC ads are delivered via a bidding process, including the paid results you see at the top of Google search engine results pages (SERPs) and some Google Display Network ads.
Advertisers bid on terms that are desirable and relevant to their businesses. Search terms that lots of businesses want traffic for are more expensive, while less desirable terms are cheaper; a successful campaign will balance CPC with the potential and expected revenue. This system allows advertisers to reach searchers at a price point that fits their budgets.
But if you think it all comes down to money—not quite! Google's #1 priority is always the quality of the search results. To that end, Google AdWords selects which PPC ads to display based not only on the bids, but also on who it believes will do the best job of serving the searcher's needs.
When a user conducts a search, AdWords selects ads based on their Ad Rank, a combination of their CPC bid amounts and the quality and relevance of their target keywords and campaigns ("Quality Score"). A lot of factors go into the quality score, including click-through rate, the relevance of each keyword in the ad group, landing page quality and relevance, relevance of ad text, and your historical AdWords account performance. QS is calculated dynamically, so you'll be able to see it as you plan and execute your campaign.
This system incentivizes advertisers to provide value and not just trick people into clicking. Providing valuable content through PPC ads provides better ROI in two ways: first, AdWords charges you less for ad clicks if you create relevant, intelligently-targeted campaigns that are useful and satisfying to users. Secondly, creating valuable content that has a consistent message all the way from the keyword group to the ad copy to the landing page will increase conversions, bringing in more leads and revenue.
If you just wanted to know what "PPC" and "CPC" stood for and got suckered in to reading all of this, you have my apologies.