Cost-per-click bidding

What it does

Cost-per-click (CPC) bidding is one of several bidding methods that you can use to determine how you want to pay for user interactions with your ads. With CPC bidding, you’re charged for your advertising activity only when users click on your ads.
Think about billboards: Advertisers pay for billboard space based on how many people might see their ad as they drive by, whether those people actually notice the ad or not. Internet ads are different: With AdWords CPC bidding, you only pay for Google's "billboard space" when you know users saw your ad and were motivated enough to click. If 100 people view your ad and three click it, you pay for the three clicks, not for the other 97 views. This bidding method gives you good value because you pay only when a viewer is interested enough to click your ad and learn more.

Choosing a max. CPC bid

When setting up a campaign with CPC bidding, you have the option of limiting the amount you’re willing to pay for a click by using a maximum cost-per-click bid - or simply "max. CPC" (unless you're setting bid adjustments, or using Enhanced CPC).
How do you know what max. CPC to set? You can figure this out based on what you know about your business and the value of a sale. For example, if you sell $5,000 diamond rings, one new customer is probably worth more than if you sell $0.99 packs of gum. One helpful tool in establishing CPC bids is Keyword Planner: it shows you how often some keywords get searched, and gives you cost estimates at a glance.
Note that often you'll pay less than your max. CPC because with the AdWords auction, the most you'll pay is what's needed to rank higher than the advertiser immediately below you. Read the section below to learn more about the final amount you're charged for a click.

Example

If you think it's worth 25 cents to have someone visit your website, you can set $0.25 as your max. CPC. You'll pay a maximum of $0.25 when a person reads your ad and clicks it, and you pay nothing if they don't click.
Let's say you create a text ad and set a max. CPC bid of $0.25. If five hundred people see the ad, and 23 of them click to learn more, you pay only for those 23 clicks. Your max. CPC bid was $0.25, so you'll pay no more than 23 clicks x $0.25, or $5.75.

The final amount you're charged

Your max. CPC bid is the most you'll be charged for a click, but you'll often be charged less - sometimes much less. That final amount you're charged for a click is called the actual CPC.
Actual CPC is often less than max. CPC because with the AdWords auction, the most you'll pay is what's minimally required to hold your ad position and any ad formats shown with your ad, such as sitelinks. You pay just enough to beat the Ad Rank of the advertiser with the next highest Ad Rank (or the minimum Ad Rank necessary to appear in that position). You can learn more about Ad Rank and actual CPC by watching the video below.

How to enter or edit your CPC bid

When you first set up a campaign and ad group, you’ll be asked to select a bidding strategy at the campaign level. With CPC bidding you have the following options:

• Manual bidding: You select “I'll manually set my bids for clicks” and choose your own bid amounts.
• Automatic bidding: You select “AdWords will set my bids to help maximize clicks within my target budget” and let AdWords set your max. CPC for you. With automatic bidding, you're telling us, "Set my max. CPC bids to get me as many clicks as you can given my overall budget."

If you choose the “Advanced options” when setting up your campaign for the first time, you’ll have the opportunity to set a max. CPC, shown as the CPC bid limit, that will apply to all of your ad groups by default. If you do not enter a CPC bid limit for your campaign, you may be charged any amount for a click within your daily budget. Note that you can edit your CPC bids at any time.

For new and existing campaigns you can apply your max. CPC bid several ways. Let's say you have a bakery, and you've set up a "breakfast" ad group with keywords like donuts, crullers, and apple fritters. Here's how you might set and edit your bids:

• If you want all the keywords in an ad group to have the same bid: Set an ad group default bid. If you choose a $1 CPC, then that's your max. CPC when someone searches for donuts, crullers, or apple fritters -- any of your keywords. The same bid applies to placements if you're running your ad on the Display Network. This is the easiest way to manage your CPCs.
• If you want the keywords in an ad group to have different bids: Set keyword bids. For instance, if you know that people who search for apple fritters tend to buy more than people searching for donuts, then you might bid $1.25 for each click on apple fritters and $1 for each click on donuts.
• If you want your Display Network targeting methods to have different bids: You can set a max. CPC for placements, topics, or other targeting methods. For instance, you can try to help your ad show on a donut recipes website by setting a custom bid for that particular placement on the Display Network tab.

Learn how to edit your bids.

Fix a problem with CPC bidding

Next steps

• Choose your bid and budget
• Learn more about actual cost-per-click
• How to set bid adjustments