Also known as pay-per-click (PPC), cost per click (CPC) is a method that websites use to bill based on the number of times a visitor clicks on an advertisement. The alternative is a cost per mille (CPM), which is the number of impressions, or viewers, in thousands, regardless of whether each viewer clicks on the advertisement or not.
CPC is often used when advertisers have a set daily budget. When the advertiser's budget is hit, the ad is removed from the rotation for the remainder of the billing period.
For example, a website that has a CPC rate of 10 cents and provides 1,000 click-throughs would bill $100 ($0.10 x 1000). The amount that an advertiser pays for a click is usually set either by a formula or through a bidding process. The formula used is often cost per impression (CPI) divided by percent click-through ratio (%CTR).
CPC is the amount that a website publisher receives when a paid advertisement on the site is clicked. Business is increasingly done online, and advertising is following.