By Neil Patel

People always ask me the same question about AdWords:

“What’s a ‘good’ cost per click?”

My response back to them is always the same:

“Why do you care?”

See, most people have AdWords wrong. They obsess over the costs.

They know that more and more competitors are advertising on the platform, which drives up prices.

So they’re zeroed-in on how much they’re going to have to spend.

That’s the wrong approach.

Instead, they should be concerned with what they’re going to get back in return.

I know this sounds counterintuitive. However, I almost never worry about the Cost Per Click for keywords.

In fact, I almost always ignore them.

I’m going to show you why CPC’s don’t matter in many cases. I’ll show you how worrying about keyword costs can mislead you time and time again.

Then, I’ll show what you should be analyzing to make sure you’re not leaving tons of money on the table.

Why Cost Per Click Doesn’t Matter (and What to Analyze Instead)

Each year, companies analyze the most expensive keywords in the country.

These are typically competitive phrases in law or insurance and can cost as much $50 for just a single click.

The insane thing is almost none of those clicks will turn into customers immediately.

Instead, they’ll usually opt-into a form, first.

That means you might have to front the bill for 50 or 100 clicks before someone ever converts.

We’re talking thousands of dollars for a single customer.

It makes sense on the surface; CPC ultimately determines how much you need to spend.

WordStream, for example, always releases an annual update on Cost Per Click benchmarks across industries.

The businesses I own are all software-related. But we work with clients across different industries. So it’s always interesting to look at these cost breakdowns.

Average ecommerce CPC’s might only be around a dollar, while law might run up to around six dollars (these are higher than most Bing Shopping campaigns, which should be considered for e-commerce businesses as well).

To be honest, though, I don’t obsess over costs, alone.

The first reason comes down to what the study says at the top: Averages.

Average CPCs don’t really mean all that much.

Popular, generic terms aren’t usually all that expensive.

Only a tiny percentage of the people who ever click on those will convert. Whereas, a more commercial long-tail keyword will be incredibly expensive.

Just compare the difference in costs between “tax” and “file back taxes”:

See? It’s not even close.

That makes it hard to use a standard, “industry average benchmark” for any in-depth analysis.

There’s another reason why I don’t like to just look at costs — because you’re often forgetting the other side of the equation.

Conversions ultimately have a much bigger impact than costs.

Now, let’s check out those industry average conversions from the same study:

Ok, now we’re getting a little closer.

If you remember, …read more

Source:: Kiss Metrics Blog