Actual cost-per-click (CPC): Definition
Your actual cost-per-click (actual CPC) is the final amount you're charged for a click. You're often charged less -- sometimes much less -- than your maximum cost-per-click (max. CPC) bid, which is the most you'll typically be charged for a click.
Actual CPC is often less than max. CPC because with the Google Ads auction, you only pay what's minimally required to clear the Ad Rank thresholds and beat the Ad Rank of the competitor immediately below you. And if there are no competitors immediately below you (for example, if no competitors other than you have cleared their Ad Rank thresholds), you only pay the reserve price. (See Ad Rank thresholds to learn more.) Keep in mind that your actual CPC may exceed your max. CPC if, for example, you’ve enabled Enhanced CPC or if you've set a bid adjustment.
How this works
We combine the auction-time ad quality (including expected clickthrough rate, ad relevance, and landing page experience), the max. CPC bid, the Ad Rank thresholds, the competitiveness of an auction, the context of the person's search, and the expected impact of extensions and other ad formats to determine Ad Rank. When estimating the expected impact of extensions and ad formats, we consider such factors as the relevance, expected clickthrough rates, and the prominence of the extensions or formats on the search results page. Each advertiser’s Ad Rank is then used to determine where the ad appears and what types of extensions and other ad formats will show with the ad (or whether the ad or ad format will appear at all).
For ads on the Search Network, the Ad Rank thresholds (and the resulting Actual CPCs) are typically higher for ads above search results in order to maintain a high-quality experience and to help ensure that actual CPCs reflect the value of the ads’ prominent location. As a result, the actual CPC when you appear above search results is often higher than the actual CPC if you appear below search results, even if no other advertisers are immediately below you. Although you may pay more per click, top ads usually have higher clickthrough rates and may allow you to show certain ad extensions and other features available only in the top ad slot. As always, you’re never charged more than your max. CPC bid (unless you're using automated bidding tools).
Also note that the competitiveness of an ad auction can affect your actual cost-per-click. If two ads competing for the same position have similar ad ranks, each will have a similar opportunity to win that position. But as the gap in ad rank between two advertisers’ ads grows, the higher-ranking ad will be more likely to win but also may pay a higher cost-per-click for the benefit of the increased certainty of winning. This same pricing dynamic applies for each ad position down the search results page. In this way, your actual cost-per-click is influenced not only by the competitor immediately below you but also by the competitors below them.
Here’s a simplified example of how Ad Rank and Actual CPC works. It doesn’t account for all of the Ad Rank and pricing factors discussed above, but instead aims to give you a high-level overview of our algorithms:
Assume five advertisers are competing for a maximum of four ad positions above search results on the Google search results page. The respective Ad Rank of each of the advertisers is, say, 80, 50, 30, 10, and 5.
If the minimum Ad Rank necessary to show above the search results is, say, 40, only the first two advertisers (with Ad Ranks of 80 and 50) exceed the minimum and show above the search results. The advertiser with the Ad Rank of 80 pays just enough (Ex: rounded up to the nearest billable unit, which in the U.S. is $0.01) to beat the advertiser with the Ad Rank of 50. Since there’s no other eligible competition, the advertiser with the Ad Rank of 50 pays just enough to beat the minimum Ad Rank of 40.
If the minimum Ad Rank necessary to show below the search results is 8, then two of the three remaining advertisers (with Ad Ranks of 30 and 10) will show beneath the search results. The advertiser with an Ad Rank of 30 will appear in the first position beneath the search results, and will pay just enough to beat the advertiser with an Ad Rank of 10. The advertiser with an Ad Rank of 10 will show beneath that advertiser, and will pay just enough to beat the minimum Ad Rank of 8. The advertiser with an Ad Rank of 5 didn’t meet the minimum Ad Rank and so won’t show at all.
For certain ads on the Display Network, your actual CPC will be different than described. Learn more about the Display Network ad auction.