Why is CPC so high on LinkedIn?

LinkedIn advertising can be extremely effective for B2B companies looking to generate leads and increase brand awareness. However, the cost per click (CPC) on LinkedIn is notably higher compared to other social media platforms like Facebook or Instagram.

Highly Targeted Audience

One of the main reasons CPC is higher on LinkedIn is because of its highly targeted professional audience. With over 722 million members worldwide, LinkedIn users are there specifically for business and career-related purposes.

This means companies can target their ads extremely precisely based on job title, company, industry, skills, and a range of other professional criteria. Targeting such a specialized audience comes at a premium price.

High Commercial Intent

LinkedIn members also tend to have high commercial intent while browsing the platform. They are there to network, research companies, look for jobs, and engage with professional content. This makes them more likely to convert on ads than users casually scrolling social media.

With the promise of higher conversion rates, LinkedIn can charge advertisers more per click while still delivering results.

Limited Ad Inventory

LinkedIn strictly limits the number of ads displayed to maintain the professional user experience. This scarcity of ad inventory allows LinkedIn to charge higher CPCs.

There are only a certain number of impressions available per day compared to other social platforms. Lower supply but steady demand lets LinkedIn command higher prices.

High Income Target Audience

The average household income of LinkedIn members tends to be well above average. According to LinkedIn’s 2020 demographic data:

• 57% of members earn over $75,000 per year
• 40% earn over $100,000 per year

Targeting an affluent audience willing to spend allows LinkedIn to charge higher CPCs to advertisers. The potential reward is greater despite the higher cost.

Competition for Clicks

Strong demand for LinkedIn’s highly targeted audience leads to fierce competition for ad clicks. The auction-based advertising model means CPC prices surge with increased competition.

With over 8 million advertisers and counting, standing out requires outbidding others. This drives up prices, especially among sought-after demographics.

Quality Score Factors

LinkedIn’s algorithm also considers Quality Score factors that impact CPC pricing. These include:

• Ad relevance
• Landing page experience
• Account history and reputation

Low scores in these areas can drastically increase CPC. Optimizing these factors helps control costs.

Campaign Targeting Options

Narrow targeting parameters like job title and company name tend to have higher CPC. Broad targeting based on industry or location usually has lower CPC.

But broader targeting gets lower conversion rates. There is a tradeoff between targeting precision and CPC costs.

Ad Format

Different ad formats have different CPC ranges. For example, standard text ads tend to have lower CPC than dynamic Ads or Sponsored Content. Video ads and other premium formats come at a premium CPC.

Historical Bidding Data

LinkedIn determines suggested bids and pricing based on historical data. If advertisers consistently bid higher for certain audiences previously, CPC will climb higher for those targets.

Average CPC by Industry

Here are the average CPC rates across some major industries on LinkedIn:

Technology and consulting tend to have the highest CPC due to fierce competition. Education has the lowest average CPC on LinkedIn advertising.

Strategies to Lower CPC

Despite the higher costs, LinkedIn advertising can still deliver excellent ROI for B2B brands. Here are some tips to help control CPC costs:

• Set precise targeting parameters like seniority, job function, skills
• Test different targeting combinations to find the optimal balance
• A/B test ad variations to improve relevance
• Ensure high-quality and optimized landing pages
• Monitor Quality Score and optimize where possible
• Use negative keywords to weed out irrelevant clicks
• Run A/B tests on different bid amounts
• Advertise lower CPC ad formats like text ads
• Make full use of LinkedIn’s audience expansion tools
• Promote content to warm up cold audiences first

Conclusion

LinkedIn advertising brings the benefit of reaching highly relevant professional audiences. But matching the right ad with the right person comes at a premium cost per click.

By optimizing campaign targeting, ad quality, landing pages, and bids, brands can balance getting results with keeping costs in check.

Savvy advertisers find ways of maximizing LinkedIn’s value despite the platform’s high CPC pricing. With the right strategy, LinkedIn can deliver outstanding B2B results and ROI.