Bidding in AdWords is extremely complex. Every time a user searches in Google, an auction occurs between many advertisers targeting the search term. How much each advertiser needs to pay depends on the max CPC bid & the quality score. Let us now study Average CPC and Max CPC in detail.
Max CPC
Max CPC is the variable you have control over. One can decide the maximum amount you are ready to pay per click for a keyword. Let us say for a keyword, your max CPC bid is 10. When a user searches in Google, an auction starts between you and other advertisers targeting that keyword. You would pay any number from 0 to 10 based on how competitors bid for the keywords. This cost varies with every single click. Here is a sample scenario that could happen.
| Auction | Max CPC | Cost |
|---|---|---|
| Auction 1 | 10 | 10 |
| Auction 2 | 10 | 7 |
| Auction 3 | 10 | 8 |
| Auction 4 | 10 | 7 |
Avg CPC
Average CPC or avg CPC results from your max CPC bid and your competitor’s bids. It is an average of the cost incurred for every single click. In the above example, We generated 4 clicks at 32 cost, which comes to an average cost per click or avg CPC of 32/4 = 8.
The beauty of AdWords is that one cannot control the average cost per click. It is highly dynamic and can vary between accounts and with average positions. It can even vary with the time of day, week, or month.
Understanding the relationship between Average CPC and Max CPC is very difficult. However, it is a core component in building an effective marketing strategy. Hence, examining and understanding this difference between Average CPC and Max CPC is necessary.
