Software and internet platforms
CPC (cost per click)
The price an advertiser pays each time someone clicks an ad.
Facts checked against sources onWhat does CPC (cost per click) mean?
Cost per click is what an advertiser pays when a user clicks its ad. It is common in search advertising, such as Google Ads, where advertisers bid in auctions for keywords. Example: an advertiser pays a CPC of 0.50 and gets 2,000 clicks, spending 1,000. For the platform, revenue per 1,000 impressions (the effective CPM) = click-through rate x CPC x 1,000: if 2 percent of viewers click at 0.50, that is 0.02 x 0.50 x 1,000 = 10. Advertisers compare CPC with how many clicks turn into sales.
Where does it come up in case interview prep?
- Marketing return: CAC, payback, incrementality, and why last-click credit misleadsLesson in Customers and growth: the economics of marketing
- How internet platforms, marketplaces, and digital ads workLesson in Internet platforms, marketplaces, and digital advertising
- Platform unit economics: contribution per order and ad revenueLesson in Internet platforms, marketplaces, and digital advertising
Related terms
- CPM (cost per thousand impressions)The price an advertiser pays for 1,000 views of an ad.
- ROAS (return on ad spend)Revenue earned for each unit spent on advertising.
- CAC (customer acquisition cost)What it costs, on average, to win one new customer.
- Annual recurring revenue (ARR)The yearly value of all active subscription contracts at a point in time.
- Net revenue retention (NRR)How much recurring revenue a group of existing customers brings in a year later.
- CAC payback periodHow many months of gross profit it takes to earn back the cost of winning a customer.
- Rule of 40A software company's growth rate plus its profit margin should add up to at least 40 percent.
- Gross merchandise value (GMV)The total value of goods or services sold through a platform.
Learn it in context
See CPC (cost per click) at work in a lesson from Customers and growth: the economics of marketing, with checks as you go.
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