Cost per click (CPC)

From The Yaffe Center

It is a type of pricing model where the search engine provider gets paid every time a user clicks on the advertisement. Google uses CPC pricing model where CPC is calculated as:

Google’s CPC = Ad rank of keyword below yours divide by keyword’s quality score + $0.01

Advertiser CPC bid Quality score Ad Rank Position CPC A $0.20 1.7 $0.2 *1.7 = 0.34 1 $0.37 B $0.40 1.2 $0.4 * 1.2 = 0.24 2 $0.39 C $0.10 1.4 $0.1 x 1.4 = 0.14 3 $0.01

In the above example, adv A CPC = adv B ad rank / adv. A quality score + 0.01 = 0.24/1.7 + 0.01 = $0.15 Since there are no ads below advertiser C for the particular keyword they are charged with the minimum bid price of $0.01 to place their ad.