# Pay-Per-Click

**Acronym:** PPC  
**Category:** metrics  
**Short Description:** An advertising model where advertisers pay only when users click their ads.  
**Last Updated:** 2024-03-15

## Definition

Pay-Per-Click is an advertising model and auction system where advertisers bid for ad placement and pay only when users click their ads. The actual cost per click is determined through a complex auction that considers bid amounts, quality scores, expected click-through rates, and landing page experience. This model aligns advertising costs with user engagement rather than just exposure.

## Calculation

**Formula:** `Effective PPC = (Quality Score × Max CPC Bid) / Ad Rank Threshold`

**Explanation:** The actual cost per click is determined through a second-price auction system weighted by quality factors.

### Components

- **Quality Score**: Platform's 1-10 rating of ad relevance, expected CTR, and landing page experience
- **Max CPC Bid**: Maximum amount advertiser is willing to pay per click
- **Ad Rank Threshold**: Minimum ad rank required for given ad position

## Examples

- A $2 max CPC bid with Quality Score 8 might result in $1.50 actual CPC due to auction dynamics
- B2B keywords averaging $3.33 PPC vs B2C keywords at $1.16 PPC
- Google Search averaging $2.69 PPC vs Display at $0.63 PPC

## Related Terms

### Component Terms

- **[Cost Per Click (CPC)](/resources/glossary/metrics/cost-per-click-cpc)**: The actual price paid per click in PPC advertising
- **[Click-Through Rate (CTR)](/resources/glossary/metrics/click-through-rate-ctr)**: Major influence on Quality Score and effective PPC costs
- **[Cost Per Action](/resources/glossary/metrics/cost-per-action-cpa)**: PPC campaigns ultimately optimize toward CPA goals
- **[Return on Ad Spend (ROAS)](/resources/glossary/metrics/return-on-ad-spend-roas)**: ROAS determines profitable PPC bid strategies
- **[Conversion Rate](/resources/glossary/metrics/conversion-rate)**: Conversion performance influences maximum viable PPC bids

### Child Terms

- **[Programmatic Advertising](/resources/glossary/general/programmatic-advertising)**: The broader category of advertising that PPC belongs to