What Causes CPC to Increase?

If you’ve been running paid advertising campaigns, you’ve probably noticed that your cost-per-click (CPC) has been steadily increasing over the past few years. This phenomenon is known as “CPC inflation” and it’s a real pain point for marketers and business owners alike.

Just think about it: in 2021, the average CPC on Google Ads was around $0.52. But by the start of 2022, it had jumped to $0.62. 

That’s nearly a 20% increase in just one year! And experts predict this trend will only continue, with CPC costs climbing even higher by the end of the current fiscal year.

No industry is immune to CPC inflation either. Whether you’re advertising in the legal sector, home services, e-commerce, or any other space, you’re likely facing the same challenge of your advertising costs steadily rising. Keep reading to learn five reasons why.

5 Reasons Why Your CPC Costs are Increasing

The simple explanation is that there is more competition than ever for prime digital real estate. As more businesses jump into the fray, they’re all bidding higher and higher to get their ads at the top of the search results.

Competition

Competition is the main culprit behind rising CPC prices. As more and more businesses compete for top ad placements, it is only natural to see the prices reflect that. 

It’s a simple case of supply and demand. With a limited number of advertising spots available, all those extra competitors push the average CPC higher and higher. 

However, it’s important to note that competition isn’t the only culprit here. There are several other factors that could be causing your CPC to increase. 

Poor Ad Copy

While Google’s search algorithms may still retain an element of mystery, one thing is abundantly clear: they prioritize quality over quantity when it comes to ad performance.

Google Ads assigns a “quality score” to every piece of content you publish, evaluating how well your ad copy aligns with target keywords and search intent. If your ads fail to engage your audience or start to lose relevance, your click-through rates will suffer as a result.

When Google’s systems detect this drop in user engagement, they respond by lowering your quality score—which then directly translates to higher CPC costs for those ads. 

It’s a vicious cycle that demands laser-focused attention on creating hyper-relevant, high-performing product copywriting. 

Larger Ad Spaces

Another significant contributor to rising CPCs is the changing landscape of the Google Ads platform itself. Over the past few years, Google has made some major layout changes, eliminating the right-side ad column and instead displaying all ads above the organic search results.

This means there is far less available “real estate” for advertisers to compete for. If your ads aren’t ranking in those coveted top positions, you’re facing an extremely limited advertising canvas—one that comes at a much steeper price tag.

Exact Match is now like “Phrase” Match

Google’s search algorithm is continuously evolving to keep pace with the growing complexity of user queries. Where once it favored strict keyword matching, the system now incorporates a much broader, more semantic approach to retrieval.

This means the specific keywords you’re targeting in your PPC campaigns may be getting “watered down” by Google’s algorithm, which then factors into higher CPCs. 

After all, if your ads are being shown for a wider range of search terms beyond your core keywords, the competition (and costs) for those placements will naturally increase.

Seasonal Changes

During peak periods like holidays or major events, the surge in advertiser demand invariably leads to skyrocketing CPCs. To navigate these fluctuations, you need to closely monitor your campaign performance, adjust your bids and budgets, and potentially run hyper-targeted seasonal campaigns to maximize your returns.

Tips to Stay Competitive Despite Increased Cost-Per-Click

Okay, so CPCs are going up—that’s the bad news. But the good news is there are strategies you can implement to stay competitive and maximize the ROI of your paid advertising campaigns:

• Optimize Keywords for Audience Intent: By closely aligning your keyword targeting with the true intent and needs of your target audience, you can improve the relevance of your ads and drive up click-through rates. This in turn can help offset rising CPCs.
• Adjust and Refine Your Campaign: Continuous monitoring, testing, and refinement of your campaigns is critical. Whether it’s adjusting targeting, testing new ad creatives, or optimizing bidding strategies, proactive optimization is the name of the game.
• Increase Conversion Rate with a UX Update: Don’t just focus on driving traffic—make sure you’re also maximizing the user experience and conversion rate of your website. Revamping the user-experience (UX) on your site to be more engaging can have a huge impact on your conversion rate.

You Don’t Have to Pay High CPCs: Organically Rank for Keywords with SEO!

While the rising costs of pay-per-click ads can be scary, there is a powerful alternative that can help reduce your reliance on bids: Search Engine Optimization (SEO).

By optimizing your website’s content, you can significantly boost your organic visibility and rankings for the most valuable keywords in your industry. This allows you to attract qualified leads without having to pay the inflated ad prices that many of your competitors are facing.

Of course, SEO does require a longer-term investment and a bit more patience compared to the immediate results of PPC. But the payoff in terms of sustainable, compounding traffic growth over time can be well worth it.

Don’t let CPC Inflation Catch You Off Guard!

If you’re feeling the squeeze of skyrocketing CPC costs, it’s time to partner with a true PPC specialist who can help you navigate these challenges. 

Enter Timmermann Group. We’re certified Google Partners with the expertise to optimize your paid campaigns for maximum ROI—even in the face of relentless CPC inflation. 

But we don’t stop there. 

We also offer comprehensive SEO services to boost your organic visibility and reduce your reliance on paid ads. So start a conversation today, and let’s take back control of your advertising budget.