CPC: Maximum, average and minimum. An earlier post re-visited

As the Inside AdWords blog approaches its three year anniversary we thought it would be useful to repeat a few reader favorites from our distant past, for those of you who have joined us only recently.

Today we re-visit a popular post from 2006, regarding the several ways in which you'll see 'CPC' mentioned in your account.

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Over the years, a specialized vocabulary has evolved around cost-per-click (CPC) advertising, and many newer advertisers find themselves a bit at sea until they've spent a good amount of time with their accounts -- and in the AdWords Help Center, where they'll find a helpful glossary of the most commonly used terms.

One particular area of confusion revolves around the three types of CPCs -- Maximum CPC, Average CPC, and Minimum CPC -- so let's take a closer look at these terms:

CPC is an abbreviation for cost-per-click, and refers to the cost that you will pay (per click) when a user clicks on your ad.

Maximum CPC is a maximum amount that is set by you, the advertiser, and defines the most you wish to pay for a click on a keyword. Keep in mind that you don't automatically pay this maximum amount because the AdWords Discounter will always reduce the amount you are charged to be just one cent more than the minimum necessary to keep your position on the page.

Average CPC (also seen as Avg. CPC in your account) is literally that: an average. Since each click you receive may have a different CPC depending on a variety of factors, we show you the Average CPC in your account to give you an effective overview. The Average CPC is determined by totalling the cost of all clicks and then dividing that total by the number of clicks.

Minimum CPC (more commonly known as the minimum bid) is an amount based on the keyword's Quality Score that is assigned to each keyword in your account. The minimum bid is the least amount you may pay per click in order for your keyword to show ads.

We hope this sheds some light on the subject - and invite you to do a little further exploring in the searchable Help Center, if you'd like a greater depth of detail.

Posted by Blake, Inside AdWords crew