In a rare turn of events for search marketers, the average CPC (cost per click) search marketers paid to Google in Q4 2011 actually fell by 8% according to MediaPost’s report on Google’s Q4 analyst earnings call.
As a search marketer, this news is extremely timely, relevant and refreshing. CPCs have been escalating for years as more and more competitors flood search with their ads.
It seems that many improvements that Google has made to scoring ads (QualityScore) and better education of advertising best practices, has lead to an increase in the quality of ads and advertising campaigns. This has made the campaigns more efficient, which then can often lower the cost of advertising and CPCs. To summarize at a really high level, higher quality ads don’t necessarily need the highest bid to be shown first and win clicks. Google factors in many variables to determine rank.
However, advertisers should not necessarily breathe a sigh of relief. In certain industries that are highly competitive, CPCs may not have declined, and certainly not by 8% as reported. Only your own data will show how your business has been affected. But, it might make you take your foot off the gas a bit and back down on those bids. I have long pondered about what would happen if advertisers all backed off to form a reverse auction, per se… Where everyone kept lowering their bids. A crazy thought of course, one that probably cannot take place in free market capitalism; and it has similarities to a cartel so-to-speak.
Nonetheless, I continue to encourage advertisers to occasionally take their foot of the gas and focus on landing page quality and ad quality versus simply raising their bids constantly. Focusing on the quality will yield better long term results.