Online Advertising - What The Cost Per Click Can Tell You

Cost per click is a metric that online marketers have borrowed from the world of direct marketing (where it's called cost per response). It is literally the cost of getting one click to your site from any given ad source.

In pay-per-click advertising (e.g. Google AdWords) you're buying clicks at a set rate, so you know the gross cost per click before you purchase.

With other forms of advertising, you have to wait for the results to come in, and then work out the cost per click. In this case, it's the cost of the advertising divided by the number of clicks you get. For example, if I pay $50 to email 1,000 people, and get 10 clicks through to my website, I've paid $10 per click ($50 worth of advertising divided by 10 clicks).

Other types of marketing activity are more difficult to measure, because there is generally no up-front cost (e.g. article marketing). There's a very good reason why you should cost this 'free' marketing activity (explained below).

The best way to measure 'free' marketing activity is to place a value on your time, and work the cost per click from that. For example, Jo values her time at $40 per hour. She writes an article in 30 minutes and receives 5 clicks as a result. The cost per click is $4 ($20 for 30 minutes of her time divided by 5 clicks).

Why Use Cost Per Click on 'Free' Marketing Activity?

In the above examples, the email advertising generated 10 clicks, while article marketing delivered only 5. Without knowing the cost per click, it could seem to Jo that she gets better results from email marketing.

Yet the cost per click data tells us she gets 2.5 times more value out of article marketing. And of course, Jo still has to oversee the email campaign (e.g. write copy, assess the results). This further increases the real cost per click from her email advertising campaign.

As soon as she knows this, Jo has a rational basis for determining where to invest her time. It's clear she gets more benefit from article marketing, and also frees up money to invest elsewhere in her business.

Without a solid measure such as cost per click, Jo would have to fall back on the volume of clicks each promotional activity delivered. And as the examples show, volume isn't necessarily a good indicator of value (email advertising delivered twice the clicks, but cost 2.5 times more per click).

You'll find more information about lead generation and online advertising on my Blog.