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How does cost per click advertising work?

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Cost-per-click, or CPC, advertising, is a type of advertising where the client is billed based on the number of times that a visitor clicks a banner or other link instead of by the number of impressions, which is common in other pay-per-click advertising schemes, notes Investopedia. Cost-per-click advertising campaigns are generally used when an advertiser has a set daily budget, since whenever the budget is hit, then the ad is removed for the day and then restored whenever the new budgeting day begins.

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As an example, if a company has a daily budget of $100 per day, then 1,000 click-throughs at 10 cents each would exhaust the budget for the day, explains Investopedia. The amount that is paid per click depends on the process used by the CPC company. Sometimes it is established through a bidding process, auction style, or it may be a set formula that is the same for all advertisers.

CPC ad campaigns can be set up in several ways to maximize the effectiveness of advertising, according to Proximity Marketing. For instance, the utilization of negative keywords in an ad campaign can prevent an advertiser's ad from displaying if a searcher enters a phrase that indicates that the searcher is not an ideal target for a product. For example, if a web design firm is advertising using CPC, then it may try to steer clear of searchers who search for "cheap web design."

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