Time To Dispel Some Common Confusion Around CPC

I thought now would be a great time to dispel some common confusion about CPC and let all of you know how I use CPC data. It is important to understand what information you can get from CPC and how this can be used to determine the monetization potential of a domain. So first let me dispel the first myth and the most common confusion around CPC.

CPC does not equal PPC pay-out

I’ll give one of my domains that I talked about on my blog recently as an example.

Keyword Phrase: Pay Off Debt
Exact-Match Global Monthly Searches:
9,900
Exact-Match Local Monthly Searches: 6,600
CPC: $7.81

Here’s where people get confused. They see a CPC of $7.81 and say – “Wow, so I can get $7.81/click – that’s great!”

WRONG – this just means that advertisers that want to get top-placement for the keyword have to pay $7.81/click. You as a publisher will most likely see only $1 or $2 per click if that!

So if CPC doesn’t tell you how much money you’re going to make when someone clicks on a link, how is it useful?

I have always used CPC to tell me if a market has good monetization potential. The higher the CPC the more advertisers are willing to pay for each lead, as it starts to creep above $5 there are oftentimes good lead generation potential. If on the other hand a keyword phrase has a CPC of $0.05 and you think you’re going to make a fortune you might want to make sure there are products to sell on your site. With a CPC of $0.05 there usually are little or no affiliate products related to the niche and oftentimes small lead generation potential.

So what does CPC tell you?

CPC can tell you the monetization potential your domain has and what strategy you might want to use to monetize your traffic. I’m not a PPC-guy so I don’t build sites filled with Adsense – instead I focus on finding affiliate products and lead generation partners that are a good fit for what visitors on my site are looking for.

In 2008 I built an army of sites, they were making good money…and then the sky fell. As PPC revenues declined to abysmal-levels I started to look at other options. I started selling eBooks which then led to other affiliate products and soon my sites were making more than they ever had with PPC.

When picking a domain to develop there are two metrics you should be VERY aware of:

  1. How many people are searching for your keywords each month?
  2. How much do advertisers value people searching for the keywords you are targeting?

The Google Adwords Keyword Tool can answer both of these questions. First I’d stick with keyword phrases with 1,000 or more exact-match searches every month. If you get onto the first page of Google you can expect to get about 500 visitors a month which is about my lowest threshold for traffic. I would also stay below 10,000 exact-match searches if you want to rank quicker. If you have more patience feel free to go for the more saturated niches but you’ll have to do more SEO, add more content, and work harder to rank well. There’s nothing wrong with this – I just prefer to go-after the low-hanging fruit.

Once you’ve verified that there is enough traffic there to make it interesting it’s time to look at the CPC. If the CPC is low, say $.30 or $.40 try to understand why. This means that web visitors searching for this niche aren’t worth very much to advertisers. Maybe this means that there are only one or two affiliate products you can sell, or maybe the products for sale in the niche provide minimum pay-out. When you see a CPC above $5 you know there is some nice interest from advertisers in people online who are searching for this keyword phrase.

The final step to deciding if you should develop a name or not is trying to find affiliate products and lead generation partners. If it’s easy to find them and the pay-outs look good then you have a good match. If you can’t for the life of you find any affiliate products that would be a good fit for your visitor and there is no lead gen potential I’d take a step back and find another domain to develop.The biggest challenge for any Domainers looking to get-into development is understanding which domains are the best fit for development.

If you like this post and would like to understand how I analyze domains for development feel free to download my free eBook – Domain Monetization 101.


So next time someone brags about high CPC remember – this has NOTHING to do with how much money they are making for each click they get. Instead it has to do with what affiliate products or lead generation partners they have, how well they rank, and how many visitors they get each month. Matching a domain containing good keywords with complimentary products and strong unique content is a recipe for Domaining passive income…just make sure you’re taking time to pick the right domain and don’t take the CPC too seriously – it’s better left as a metric to tell you whether there is monetization potential or not anything more than that and you’re probably just dreaming!

{ 9 comments… add one }

  • Still Wrong July 2, 2010, 10:23 am

    “WRONG – this just means that advertisers that want to get top-placement for the keyword have to pay $7.81/click. You as a publisher will most likely see only $1 or $2 per click if that!”

    Not accurate, vast majority of times even though an advertiser is bidding $7.81 they are usually paying 1/2 that to be #1. Depends upon the quality score, and with a high quality score you usually pay 1/2 of your CPC bid.

    Reply
    • Morgan July 2, 2010, 10:25 am

      @Still Wrong – the advertiser could still end-up paying the CPC which is why it is a maximum CPC

      Reply
  • Leonard Britt July 2, 2010, 10:29 am

    Yes, I see many domainers commit this mistake assuming that Google’s default CPC is what advertisers pay and that a site for that keyword would earn a considerable share of that figure. The reality is advertisers can pay far less for that phrase and still rank on page one for search traffic. However, if you are a publisher you are part of the content network and likely receive significantly less. I made some updates to a few sites and was seeing if the CTR had improved and noticed for one site I had two clicks today which paid a total of $0.01 – that’s worse than parking!!!

    Reply
  • Mark July 2, 2010, 10:55 am

    Hey Morgan:

    I appreciate you explaining your methodology further.

    I am curious though if you have any information or stats on what percentage of clicks the 1, 2, 3 and 4 positions on organic search receive.

    Would love it if you had any input on this.

    Thanks again for being so generous with your thoughts and insight.

    I hope others are kind and appreciative instead of snarky and jealous.

    Best,
    Mark

    Reply
  • Donny July 2, 2010, 10:55 am

    I think everybody is wrong, but then if I told ya’ll the truth, then you wouldn’t be wrong anymore. And that would be wrong. 🙂

    Reply
  • Dan July 2, 2010, 11:15 am

    You’re CORRECT in pointing out that it is used as a indicator. At the end of the day the challenge is converting the traffic into dollars. CPC indicator, along with other metrics, gets you one step closer to meeting that challenge.

    Great post!

    Thanks

    Reply
  • Morgan July 2, 2010, 11:32 am

    Great comments everyone!

    @Mark – I don’t think this is an exact-science but I’ve always heard that the #1 result in Google gets about 80% of the traffic. However I think it depends a lot on the niche and whether Google displays a map, twitter results, You Tube, etc. on the page as well, so there are a lot of factors to consider.

    Thanks @Dan – appreciate the positive feedback!

    Reply
  • tricolorro July 6, 2010, 3:53 pm

    “First I’d stick with keyword phrases with 1,000 or more exact-match searches every month. ”

    Morgan,

    Is that for Global or Local exact-match searches?

    Thanks.

    Reply
    • Morgan July 6, 2010, 4:27 pm

      @Tricolorro – I’m happy if either is over 1,000 as long as the local is not below say 700 or so. It’s not an exact science so there is no right or wrong answer – every domain is different so important to take the niche into consideration when making the decision.

      Reply

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