CPC stands for “Cost Per Click,” and is used in online advertising. CPC defines how much revenue a publisher receives each time a user clicks an advertisement link on his website. Cost-per click (CPC) refers to the actual price paid for each click in defined pay-per-click marketing accounts. For example, a publisher may place text or image-based ads on his website. When a visitor clicks one of the advertisements, he or she is directed to the advertiser's website. Each click is recorded by the advertiser's tracking system and the publisher is paid a certain amount based on the CPC.
The return on investment (ROI), whether the company is over or under paying for each action, will be determined by how much this company is paying for clicks, and by what kind of quality it is getting for that investment.
The terms pay-per-click (PPC) and cost-per-click (CPC) are sometimes used interchangeably, sometimes as distinct terms. When used as distinct terms, PPC indicates payment based on click-throughs, while CPC indicates measurement of cost on a per-click basis for contracts not based on click-throughs.
1000 impressions x 2% CTR = 20 click-throughs
$10 CPM / 20 click-throughs = $.50 per click
The amount that an advertiser pays for a click is usually set either by formula or through a bidding process. The formula used is often cost per impression (CPI) divided by percent click-through ratio (%CTR).