Cost per click is the amount an advertiser pays for a single click on an ad. It is not fixed but is set in an auction that runs on every impression. It is decided by a combination of the bid and a relevance score of the ad against the query, so that an advertiser with a stronger match can win a better position for a lower price than a competitor with a higher bid. The amount actually paid tends to be lower than the maximum bid and is derived from the score of the next advertiser in the ranking. The price differs several-fold between industries depending on the value of the customer acquired – in insurance and legal services it is an order of magnitude higher than in retail. It can be lowered by improving relevance and excluding queries that never lead to a sale.
See also: Quality Score, Ad Rank, Auction statistics.
