You will be able to explain why your cost per click or per result changes when you have not changed anything.
Many people who run ads for a small business see the cost of a click or a sale rise and fall from month to month, even when they haven't touched the ad. It's easy to assume something has broken. The cause is usually outside the ad. The price of an ad is set by an auction, and the price in an auction depends on who else turns up to compete. Your cost can change when you change nothing about your ad, so a rise in cost tells you something about the market around you. It does not mean you've done something wrong.
Google explains its pricing more plainly than the other platforms, so it is a good place to start. When you bid on a keyword, you set a maximum bid, which is the most you're willing to pay for a click. Google's help pages say you often pay less than your maximum. What you actually pay is roughly what you need to keep your position against the advertiser ranked just below you. That amount depends on both advertisers' bids and on both advertisers' ad quality ratings.
Lesson 1.1, "The highest bid does not always win", showed that Ad Rank decides where your ad appears. Ad Rank also affects the price you pay. A more relevant ad with a better landing page needs less money to hold the same position. Because of this, two advertisers next to each other on the same search can pay very different amounts per click.
Meta mostly charges when the ad is shown or when people take an action, depending on how you set up the campaign. What TikTok charges for depends on the bidding method you choose, and TikTok's help pages on bidding methods explain the current options. The auction works the same way. You compete with every other advertiser who wants to reach the same person at the same moment. On Meta, three things together decide whether you win and what it costs: your bid, the platform's prediction of how people will respond, and the quality of your ad. TikTok's help pages say its auction ranks ads by bid price and the relevance an ad might have to people.
On every platform, your price depends on how many other advertisers want the same people and how much they're willing to pay. When more advertisers chase the same buyers, the auction gets tighter and each click or result costs more.
Farah owns a modest workwear shop in Singapore that sells blouses. Farah ran the same ad for three months, with the same photo, the same words and the same daily budget. In the first month, each sale cost about S$18 in ads (an example figure). In the month before Hari Raya, each sale cost nearly twice as much. In the month after Hari Raya, the cost dropped back. Farah changed nothing. The price moved because more advertisers were competing in the auction for the same buyers, and it was this seasonal competition that caught Farah out.
In Singapore, many of these swings are easy to predict:
Fashion and gift shops crowd in before Hari Raya, Chinese New Year and Christmas, and during big online sale days such as 11.11. Tuition centres compete harder when parents are deciding on next year's classes, around exam results and the start of the school year. Travel agencies get busy before the June and December school holidays.
Some swings come from outside your own category. On Meta and TikTok you are bidding to reach people, so anyone targeting the same people is in your auction, whatever they sell. Say a large brand selling phones launches a campaign aimed at young working women in Singapore. That pushes up the cost of reaching Farah's customers, even though the brand sells phones and Farah sells blouses.
When you know a costly period is coming, plan for it so you aren't reacting after the costs have already gone up. Choose one of three options in advance. You can spend more, because buyers in that period are more ready to buy. You can spend less and wait for prices to fall. Or you can move budget to the weeks before the rush, when prices are lower.
The second thing that moves your price is how many auctions you're allowed to enter. Every time you narrow your audience or your keywords, you cut the number of chances you have to win.
Priya runs a maths centre in Tampines, the same business you may know from Digital marketing foundations. If Priya bids only on the exact search "maths tuition Tampines Primary 5", the centre enters very few auctions a day. The few advertisers who want that search compete hard for it, so the price per click can be high. If Priya adds related searches that parents actually type, the centre enters more auctions, and the system has more room to find cheaper ones.
Social platforms work the same way. An audience of mothers aged 35 to 40 in Tampines who are interested in tuition is small. The platform has fewer people to show the ad to, so it has fewer cheap chances to show it, and costs often rise.
Narrow targeting is not always a mistake. A very relevant small audience can be worth a high price, as long as you remember that part of what you pay for is the narrowing itself. Module four comes back to this when you choose how narrow to go.
Blog posts and reports often list the average cost per click or cost per thousand views by industry or country. Use these as a rough guide at most. They mix campaigns with different objectives, ads of different quality and different months of the year, and they rarely say how the numbers were collected. A figure from a US report says little about a tuition centre in Tampines.
Your own numbers are the ones that matter. After running a campaign for a few weeks, you'll have your own cost per click, cost per lead and cost per sale. Write them down and keep a simple record month by month. Your figures will move with the seasons. After a year, the record will show your own expensive and cheap periods more accurately than any published table.
Think back over your own business year. In the activity below you will name the times when competition for your buyers is likely to rise, and decide what your budget should do in each of them.
List three times of year when more advertisers are likely to compete for your buyers. For each one, note how you would plan your budget.
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