With Manual Cost-Per-Click (CPC) bidding, you can set a maximum price on the cost of someone clicking on your AdWords ads. You can get good value with this bidding method because you pay only when a viewer is interested enough to click your ad and learn more.
Think about billboards: Advertisers pay for billboard space based on how many people might see their ad as they drive by, whether those people actually notice the ad or not.
Internet ads are different: With AdWords CPC bidding, you only pay for Google's "billboard space" when you know users saw your ad and were motivated enough to click. If 100 people view your ad and three click it, you pay for the 3 clicks, not for the other 97 views.
How CPC bidding works
For CPC bidding campaigns, you set a maximum cost-per-click bid - or simply "max. CPC" - that's the highest amount that you're willing to pay for a click on your ad (unless you're setting bid adjustments, or using Enhanced CPC).
If you think it's worth US$.25 to have someone visit your website, you can set US$0.25 as your max. CPC. You'll pay a maximum of US$0.25 when a person reads your ad and clicks it, and you pay nothing if they don't click.
Let's say you create a text ad and set a max. CPC bid of US$0.25. If 500 people see the ad, and 23 of them click to learn more, you pay only for those 23 clicks. Your max. CPC bid was US$0.25, so you'll pay no more than 23 clicks x US$0.25, or US$5.75.
Often you'll pay less than your max. CPC because with the AdWords auction, the most you'll pay is what's minimally required to hold your ad position and any ad formats shown with your ad, such as sitelinks. Read the section below on actual CPC to learn more about the final amount you're charged for a click.
The power of AdWords automated bidding
AdWords automated bidding takes much of the heavy lifting and guesswork out of setting bids to meet your performance goals. Conversion-based bidding is powered by auction-time technology, optimizing bids with precision on actual search queries for each and every auction. It also factors in a wide range of auction-time signals including device, location, time of day, language, and operating system to capture the unique context of every search. Learn more about AdWords automated bidding.
How to decide what CPC bid amount to set
How do you know what CPC to set? You can figure this out based on what you know about your business and the value of a sale. For example, if you sell US$5, 000 diamond rings, one new customer is probably worth more than if you sell US$0.99 packs of gum.
Once you've set max. CPC amounts that you're comfortable with, see how many clicks your ads begin to accrue, and whether those clicks lead to business results on your website. Also, remember that Internet traffic is always changing, so it's important to re-evaluate your CPC bids regularly.
Using bid adjustments to reach the right customersYou can set bid adjustments that increase or decrease your max. CPC bids for searches occurring on mobile devices or in specific locations. If your campaign targets the Display Network, you can also set bid adjustments for targeting methods in your ad group, like topics or placements, to help your ad show to the most relevant audience. Bid adjustments give you more control over when and where your ad appears, and are applied on top of your existing bids.
The final amount you're charged
Your max. CPC bid is the most you'll be charged for a click, but you'll often be charged less - sometimes much less. That final amount you're charged for a click is called the actual CPC.