The Rising Cost of Ad Clicks on Google, And How You Can Manage It.

At Propellernet we’ve been monitoring the rising cost of ad clicks on digital channels for years. Increasingly businesses are adjusting their marketing budget with greater reliance on digital channels, and this increase plays a large part in why it’s getting more expensive. Whilst we’d expect an increase thanks to inflation, it’s the growth in competition that’s really causing the increase. Let’s have a look at what we’re seeing and how we’re helping our clients manage these costs.

We’ve taken a look at how clients from two of our primary sectors, travel and eCommerce, are being impacted. We’re using Brand keywords as the focus of our analysis as we see the most stability in this space; as Google should consistently see our clients as the most relevant search result when a user looks for them.

How Cost per Click (CPC) is Rising

Unfortunately for our clients in travel, this is an industry that’s had an aggressive increase in CPCs. In particular, we saw a sharp increase after Covid which isn’t too surprising considering we were stuck at home for a while and then suddenly allowed to see the world. On average, we’ve seen CPCs increase in Travel by over 300% comparing 2024 to 2020.

The story isn’t so scary for our eCommerce clients, where CPCs do tend to be on average lower (roughly 40% lower), but it’s still impacting profit margins. What we’re seeing in the eCommerce space is CPCs increasing closer to the 60% mark. It might not be as large as the 300% figure the Travel space is facing, but this is still going to be impacting profit.

Inflation Rate Index (Consumer Price Index)

If we compare this to a depressing graph of inflation in the UK, we can see this is also going to have a big impact on ad costs. 2022 to 2024 have been particularly difficult years for everyone, so this doesn’t just mean that CPCs are going to be increasing but also that people are spending less money.

What does this mean for you?

Two factors impacting CPC increase are not going to change: competition from more advertisers will continue to increase, and inflation will always go up. So, in short, your CPCs are always going to increase. We can help you manage that increase, but what’s essential is understanding the impact this has on your profit, especially when forecasting your marketing spend.

How to manage increasing CPCs

Now we’re comfortable with the idea of CPC increase being inevitable, we can talk about how we’re going to manage that. We’re quite good at that and the primary tool we have is optimisation of your paid media campaigns.

Automated Bidding

The way we manage our campaigns has fundamentally changed over the last decade. Those of us who remember managing CPCs with keyword-level bids will appreciate this. What automated bidding does is remove human-based decisions of what we should set as our CPC bids and uses machine learning to do this instead, and it does it based on way more data. Leveraging automated bidding strategies, particularly those focused on conversion value, can help the platform intelligently adjust bids to prioritize higher-value conversions, potentially offsetting some of the CPC increase.

Automated Bidding Watchouts

Max CPC Limits – some automated bidding options will allow you to set a maximum cost-per-click limit, which is a very proactive way of managing your CPCs. In testing we’ve done with our clients this has reduced the CPC by as much as 50%. This is great! However, please be aware that a large part of what Google will do to achieve this CPC reduction is cut down the number of longer tail searches you show ads for, therefore volume will decrease.

Target Impression Share – it can be tempting, especially when protecting your own brand on Google, to attempt to target everyone searching for your most valuable keywords. Google has a bidding model to facilitate this, Target Impression Share. Approach with caution. Not everyone searching a keyword is going to become a customer, and Google is pretty good at finding the most relevant people. If you attempt to target your entire impression share of keywords you’re going to see your CPCs increase.

Creative

All ad platforms incentivise a strong creative message. Google gives your keywords a quality score, with a large part of the score system based on Ad Relevance, Microsoft does the same, and Meta uses a similar model. In short, ensure your creative is set up based on what the ad platforms tell you is best practice. Google provides recommendations on doing that here. 

PPC/SEO Integration

Many of our clients engage both our SEO and Paid Media teams so we’re used to working together to manage activity on search engines effectively. When it comes to managing CPCs, our recommendation is to identify keywords where you have strong organic rankings and consider reducing your paid focus on those terms. Consider how active your competitors are in this space when making that decision. Conversely, target keywords where your organic presence is weak with more strategic PPC campaigns. This integrated approach can lead to a more efficient overall search strategy.

Final Thoughts

Your CPCs are going to continue to increase thanks to inflation and increased competition, so get used to that and factor it into your forecasting. It can be managed, and especially on Google you can leverage automated bidding, creative execution and working with your SEO team to slow that increase.