CPC Inflation: Why Are PPC Costs Increasing?

The online advertising arena has become an increasingly crowded space. It’s becoming harder and harder to attract good, quality leads at scale. For entrepreneurs, SEM and SEO experts alike, this is most apparent in the rising cost-per-click (CPC) metric. According to Statista, the average cost-per-click worldwide was $0.52 at the beginning of 2021 compared to $0.62 at the beginning of 2022. This effect is known as “CPC inflation,” and all signs point to CPC costs continuing their meteoric climb through the end of the fiscal year. 

CPC inflation is a tricky topic; even if you watch your pay-per-click (PPC) marketing efforts like a hawk, your CPC may still increase. No industry is safe, and as we all know, Google’s ad revenue increases on a yearly basis. Information is power, so we’re going to look at the top factors driving CPC costs higher.  

Google’s Competitive Landscape

Google Ads’ competitive landscape is a complex ecosystem. The more businesses that run online ad campaigns, the harder it is to stand out. You have to spend more advertising dollars in order to maintain parity. 

Think about the first page of the SERP. Everything “above the fold,” i.e. the top links, will be PPC ad campaigns rather than organic search results. Getting to the top of the SERP requires more cash per click, resulting in CPC inflation. 

Your Quality Score

While Google’s algorithm will always include an air of mystery, one thing is apparent: it favors quality over quantity. Google Ads assigns every piece of content that you publish a quality score by comparing its verbiage with the common keyword search strings. 

The key to successfully avoiding increased CPC costs? Publishing high-quality content to achieve a higher quality score that boosts your advertising efforts to the top of the SERP. 

Larger Ad Spaces

Google Ads has made a number of changes over the last few years. The size of ad space at the top of the page has a huge impact on increased CPC costs. Gone is the column of ads on the right side of the screen. Instead, all ads are now above the fold. 

If you are fortunate enough to appear at the top of Google’s SERP, that’s excellent news for you. Above-the-fold ad space has increased exponentially. If you aren’t ranked near the top, real estate is extremely limited, increasing your costs and diminishing the effects of your ad spend. 

Exact Match is more of a Broad Match

Google’s search algorithm is growing, changing and expanding every minute of the day. To keep up with the volume and complexity of the average search, Google has also slowly changed the way it retrieves search results. 

Once upon a time, the Google Ads engine favored results that matched the keyword entered. From there, they transitioned to keyword variations. Now, the algorithm also includes broad, semantic matches and similar keywords. The keywords included in your PPC campaigns may be getting watered down, resulting in inflated costs. 

Don’t Forget About Conversion Rates

It’s an undeniable fact: average cost-per-click rates are steadily rising. There’s a silver lining, though. 

Just because a keyword is experiencing inflation doesn’t necessarily mean that you’re losing money. Don’t forget to compare your CPC rates to your conversion rates. The business of online marketing is competitive by nature. If a particular keyword has a high CPC, but also a high conversion rate, your costs might not be higher. Remember, no metric exists in a vacuum. You’ve got to employ big-picture thinking to make sure your ad dollars are correctly purposed. 

Get CPC inflation in check with the right partner

Anytime your costs increase is a time for concern. Weathering CPC inflation isn’t as bad as it sounds, though, especially if you have the right marketing partner in your corner. A seasoned professional can help limit impulsive reactions to increased CPC and diminished ad spending by helping you identify the root causes while treating the symptoms and increasing your advertising’s quality score. 

For help bolstering your marketing efforts, or for more information regarding CPC inflation, don’t hesitate to contact the experts at the Timmermann Group today.