Help! Why is my average cost per click increasing in AdWords?

With the announcement of Google Instant sweeping across the industry well, instantly (pardon the pun!) over the last few days, I want to cover something else equally as important that has been grabbing our attention recently: rising click costs in Google Adwords, otherwise known as CPCs (cost per clicks).

Our analysis has shown that since May, many of our clients’, across multiple sectors, have seen average CPCs increasing month on month. Why is this? Well, amongst other factors, the price you pay for a click will strongly depend on the competition for the keyword you are targeting.  With this in mind, here are some factors which we feel may explain the rise in CPCs we have seen over recent months.

The end of the recession?

Many advertisers will have reduced their ad spend or cut it completely when the recession hit the UK. In turn, competition for paid ad placement is likely to have reduced. However, as we come out of recession and business starts to pick up again, many companies will be releasing budget and ploughing it back into paid search. As this channel offers almost instant search engine positioning with full control and maximum flexibility, it is the ideal tool for nervous businesses wishing to dip their toes back into search.

This is perhaps leading to greater competition and takes me nicely on to the next point…

Aggressive bidding strategies

Due to greater competition in the search auctions, companies may be forced to adopt aggressive bidding strategies in order to remain competitive and get in to the top positions for high converting search terms. This can result in bidding wars from advertisers, therefore increasing click charges across the board.

Summer promotions

Another possible explanation for the increase in CPCs is that many of our clients, operating in retail for example, run summer promotions or sales. With paid search being the ideal platform to run such promotions, many companies will be taking advantage of this – also leading to extra competition during recent months.

So, how do I remain competitive?

If the trend of increasing CPCs continues then advertisers (especially smaller businesses) will have to get a lot smarter if paid search is to remain a viable tool. Focusing on the cost per conversion for each keyword will be paramount in deciding the price you are willing to pay for each term. Small to medium sized businesses may also have to switch focus to long tail search terms as bigger brands with deeper pockets dominate the listings for the more generic, and therefore highly competitive terms.

There are many other ways to remain competitive as CPCs increase. Tools such as Conversion Optimiser will use your conversion tracking data with the aim of delivering more conversions at a lower cost. Ad Scheduling also allows you to adjust bids on certain days of the week or times of the day when conversions are usually at their highest. There are many other ways but I’ll save these for a later blog post!

Will Google Instant affect my CPCs?

As Google Instant has only been live for a few days (to those in the UK it is only available for Google account holders who are logged in), it is still very early to say what impact it may have on paid search. Over the coming weeks and months advertisers should keep a watchful eye on any unusual shifts in impressions and click-through rates (CTRs). A drop in the CTR could negatively impact quality scores, thus potentally leading to higher CPCs.

I’d love to hear if any other AdWords advertisers have experienced similar increases in their CPCs over the past few months. Please leave any comments below.

2 Responses to Help! Why is my average cost per click increasing in AdWords?

  1. Hi Robert,

    Many thanks for sharing your comments.

    It comes as no surprise that smaller businesses are suffering from increased AdWords costs at the moment.

    However, in terms of the value AdWords represents, all of our clients make a positive ROI from AdWords therefore I would say it is still one of the best advertising tools available on the market!

    Based on the information you have provided above, here are a few things worth considering before you divert your Google spend into other forms of marketing.

    Keyword Match Types

    • Using broad match terms usually brings in a lower quality of traffic as it opens up the door to searches which may not be relevant.
    • Broad match also requires ongoing optimisation of negative keywords. Try running a “search query report” to see how users are finding your ad. There will probably be a number of additional negative terms.
    • Consider refining the match types on your keywords to Phrase or Exact match. Whilst this may see a drop in volume, the quality of traffic coming to the site will usually be higher.

    Landing Pages

    • Landing pages are crucial to driving conversions in AdWords and delivering ROI.
    • Call-to-actions should be strong and clear to drive conversions. Use the content on your page to drive visitors to take a particular action, such as “contact us” or “get a free quote”. Consider testing different call-to-actions to see which one has the most impact on conversions.

    Local Relevance

    • Consider trying out a separate geo-targeted campaign for each location you service. This way you can include the location in the ad copy and you could also set up a separate landing page for each location. For example, any searches in the London area could be directed to a dedicated London page with details about the area you service, thus improving local relevance.

    I hope some of the information above helps. I would definitely try implementing some of these ideas into your campaign before withdrawing your spend from AdWords.

    Let us know how you get on!

  2. With souring costs (up to £4 per click) and sometimes 100% bounce rates on google adwords i wonder if the effort, time and money invested in this form of marketing is truely worth it.

    Whilst i really want it to work, google has been the most expensive form of advertising yet bringing in the least customers.

    My ads are well written, geographically set and i use selective broad match keywords with negative keywords.

    Another problem is before a customer even clicks on my ad, it’s already been clicked x amount of times by competitors, other marketing companies and the odd fraudster. These aren’t customers and i shouldn’t pay for them. Also paying for a click that registers 0.00 time on my site is just ridiculous. I may as well walk down to the town center, pull out my wallet and give it to a complete stranger…smiling as i do so – at least i know i’m giving it to someone who isn’t pretending they’ve earnt it.

    I did a small voucher drop in one area which produced more work than google could achieve in months. Further more i tested door knocking for 1 hour and got 7 jobs with many more referals from these jobs – at no cost.

    I’m considering diverting my google $$$’s to paying for a door knocker after yet another month of billing with google with 0 return.

    I know the website is good as i get customers from yell.com and thompsonlocal.com and the feedback on our online presence is incredible – some saying it was the deciding factor when selecting a cleaner.

    Times are changing and increased online advertising costs with a reduced return on investment is no longer an option for this company.

    Costs down, prices competitive = good turnover and people in jobs.

    Any company that i do business with is like an employee and every employee needs to show value. My question is where is the value with google adwords?

    Maybe a change to good old fashioned grass root marketing is the answer…. at least in these times for this company. In the mean time i’ll invest in organic hits and see if this is a better option.

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