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Paid Search: The Rising Cost of Cost Per Click (CPC) Advertising

Cost per Click Advertising

The Cost per Clicks (CPCs) on Google continues to rise for most businesses. What are some key considerations for advertisers when deciding how much they can afford to pay for clicks and still return on their investment? Setting the ceiling for profitable search includes considerations like consumer behavior, waste (spam) and even your firm's ability to convert inquiries into leads and sales to determine whether search can deliver long-term ROI for your business.

CPCs on Google continue to rise, leaving advertisers figuring out how to budget online ad campaigns. In the two-year period between 2012 and 2014, Google's CPC prices rose by approximately 40%, according to Jim Leichenko of AdGooro, in an article published in June of 2014. His study included nine major industry categories with cost increases in all nine ranging from a low of 7% for classified and shopping to an 83% increase in automotive keywords. Why have CPC prices gone up? As more businesses use search and participate in the "auction" to reach potential customers, the competition for bid prices for keywords between businesses will grow and increase the cost of CPCs.

How can advertisers handle the rising prices of CPCs and still run a lucrative search campaign?

  1. Focus on improving keyword performance and get rid of those keywords that don't convert to calls, forms or sales One of the key suggestions is only to use keywords that clearly relate to your business. Getting rid of poor-performing keywords saves money and focuses your campaign on traffic that may be more likely to convert. Make better use of negative keywords to help clarify which terms to ignore and which to focus on. Try to use exact keywords to target your audience. Make sure that your keywords are specifically relevant to your business and that your landing page supports both your keywords and your ad text. Analyze your marketing data for information about the clicks you are receiving: what geographical areas are the clicks coming from? What time of day? Which keywords are generating calls? Quality leads? Analyzing this data can help focus your campaign.
  2. Use ad extensions and long-tail keywords To lessen overall costs, build ad extensions into your online campaign. What are ad extensions? Simply put, an ad extension is an extra bit of pertinent information about your business, which can increase your ad's visibility. These bits of extra information can include invitations to download apps, information about your business's location (for example, that the business is five minutes from a potential customer), or its hours. Ad extensions take up more real estate on the results page and can improve the click-through rate, which in turn will offer a greater return on investment (ROI). Review your Quality Score – Google's rating of the relevance and quality of your Pay per Click (PPC) ads and keywords – and improve it by adding more highly targeted keywords to your landing pages or destination pages. Often, highly specific long-tail keywords can lower the overall costs of your CPC. For example, including the word "mortgage" may not fit the budget of your campaign, but perhaps a more specific set of keywords will be less expensive and better tailored to building an ad campaign that truly pays off.
  3. Invest in CPCs through a non-Google company (Bing Yahoo, Ask, etc.) CPC market shareAs of August 2015, Google currently holds about 66% of the online market share for desktop queries, according to marketshare.com. That leaves about 34% of the market share to be divided among Bing (10.8%), Yahoo!(10.5%) and other search engines. While the numbers clearly show that Google's CPCs lead the pack, there is lucrative business to be found using the other search engines. Due to Google's rising CPC cost, advertisers may want to explore advertising with less expensive search engines. However, this tip greatly depends on a business's analytics and volume required. If there is not enough traffic coming through other avenues such as Yahoo! or Bing, then it may be worthwhile investment to focus on geo-targeted and long-tail keywords on Google to lower your overall cost per lead from search. Companies like DAS Group can help businesses design a CPC campaign that fits your budget and your business plans.

The Future of CPCs

As costs rise, will CPCs be a part of the digital advertising game in the long run? Will CPCs be able to deliver a long-term ROI? As the world of digital marketing grows and expands into the future, one of the most important parts of CPCs (and technological media as a whole) is how that translates to customer growth and expansion. As we move into the future, we will continue to see more ROI as long as we continue to target and change our ad campaigns accordingly, letting the data lead the way. We must change and adapt so we can continue to see a long-term ROI.