Understanding recent Google CPC inflation and what to do about it.
Many of our customers have been reporting huge increases in Google Cost per Clicks (CPCs) over the last 2 years across a wide range of sectors. This trend is so strong, BrightBid attributes a lot of our own new customer acquisition to businesses turning to our AI and automation systems to regain their digital marketing equilibrium in Google after the pandemic and continue to grow profitably.
This latest report from the US-based independent performance marketing firm, Tinuiti sheds some light on what’s been happening in the US with Google search CPC’s – directionally similar to the trend in Europe.
Google operates an auction-based system with prices (CPCs) set by the available demand from advertisers and the available supply of people searching for products, goods and information on Google.
On the demand side of the equation, the last five years has seen the US advertising community double the amount spent on Google search. This accelerated during the pandemic and its immediate aftermath, as other places for advertisers to spend their marketing budgets were closed such as retail and cinemas or were restricted due to other factors such as lower commutes which reduced Out of Home advertising impressions. TV and streaming services and digital marketing vendors were the winners during this period with Google Search jumping 11% Q2 2020 vs the previous year in terms of advertiser investment, a massive 45% in Q2 2021 and a further 15% in Q2 2022.
Turning to the supply side of the equation then, people using Google to search for the products, services and information they want has also increased but not to the same extent. There was a massive 32% jump in Q2 2020 vs 2019 as people were confined to their homes, not able to visit retail or restaurants and spending long hours online. However in Q2 2021, this was only up 6% and in Q2 2022, this has been flat.
As with all supply and demand equations: if demand exceeds supply then prices rise and that’s what has been happening in Google Search to the CPCs.
There was a deceleration of CPCs in 2020 as there were more audience impressions than advertiser demand so CPCs went down by 16%. However, since 2021, demand from advertisers has far exceeded the audience supply and CPCs have increased by 37% in Q2 2021 YoY and 15% in Q2 2022.
This does vary by sector: in B2C, home and garden is booming vs smaller rises in consumer electronics.
Looking at some B2B verticals, we can see that directionally the trend is the same. The most impacted sectors were definitely ones that relied on face-to-face events to find new leads and meet customers. This marketing channel has been heavily impacted by the pandemic as events and trade shows are only just coming back to the market due to the high levels of risk and planning involved in putting these on. Direct Mail also suffered in the pandemic, another important channel for B2B marketers as many people stayed away from the office for 18 months and the level of home/ business data is far less advanced.
We have looked at data from Peekd Benchmarking for the UK specifically to show the highest impacted B2B verticals. Peekd is an ecommerce intelligence platform helping online businesses make smart decisions and realise opportunities. Specifically, the platform benchmarks Google Analytics data of many companies across the globe in order to understand relative performance. This is an incredibly valuable resource to help companies understand Google Search CPCs in their markets vs competitors.
According to Peekd, data online marketing vendors have been most heavily impacted by CPCs inflation suffering 470% YoY inflation in their Google Search. This is perhaps not surprising as this sector relies heavily on F2F events and networking and so switched budgets to Search to compete for new customers. Business Services has also been impacted with 51% inflation driven by generic B2B marketing factors; same in shipping and logistics at 30% CPC inflation, accounting at 29% and legal services at 23% as many new customers turned to Google Search instead of phoning business with pandemic switchboards in disarray. The boom in Work From Home and The Great Resignation also led to a surge in the recruitment sector.
With continued Google CPC inflation pressuring marketing and costs and thereby reducing growth and potential profits for businesses – BrightBid believes that automation will be the single biggest lever to pull in marketing in 2023 to negate some of these effects. This becomes even more important for search advertisers to improve performance, cost efficiency and competitive edge.
Artificial Intelligence (AI) will also be instrumental to manage the complexity caused by the recent instability in global markets and the increasingly complex customer journey across digital and non digital touchpoints especially in the B2B sector. AI solutions will be more important for search advertisers in 2023 and the years to come, especially for identifying and targeting intent – the likelihood of converting and conversion value prediction. BrightBid believes this will be critical for B2B customers as it will soon become very difficult to compete without a good AI solution in place that is being fed with accurate data across the customer journey.
Methodology for Tinuiti
Methodology: The Tinuiti Google Ads Benchmark Report is based on anonymized performance data from Google programs under Tinuiti management, with annual digital ad spend under management totaling over $3 billion. Samples are restricted to those programs that have remained active and maintained a consistent strategy over the time periods studied. Unless otherwise noted, all figures are based on same-client growth. The trends and figures included are not meant to represent the official performance of Google advertising or the experiences of every Google advertiser.
Methodology for Peekd Benchmarking
Peekd’s first-party data is sourced from a fully opted-in panel of websites. It provides holistic insights into consumer search behaviour for the most sophisticated clients. Peekd creates plug-ins for online marketers & web analysts who share their data accesses (> 120k B2B users). This gives us access to 350k Search Consoles, 210k AdWords Accounts and 14k Searchbars.
Data used was UK CPC data for Google Search only split by vertical and measured H1 2022 vs H2 2021.
Read more about our solution which has helped hundreds of companies through the CPC inflation.