3 Trends That Explain Why Your CPC Is Rising

Last updated on by Hunter Sunrise in Conversion Optimization

Even if you diligently follow pay-per-click advertising best practices, you may still find your cost-per-click rising. That’s because significant market shifts are happening in digital advertising, and small optimizations to your PPC ads may not be enough to overcome them.

So, what is CPC, and how do you identify marketing shifts that may increase the metric? Let’s explore.

What is CPC?

Cost-per-click or CPC is a type of advertising bidding cost advertisers pay every time a user clicks their ad. So, how is cost-per-click calculated? You can calculate the metric by dividing the cost of a paid advertising campaign by the number of clicks.

To ensure that your cost-per-click doesn’t increase it’s important to watch out for three rising market trends that can impact your CPC:

In this post, we’ll dig into each of these trends and how they may be impacting your CPC.

Rising platform competition

Like every other business market, supply and demand primarily dictate online advertising pricing.

Since auctions determine ad costs, your CPC directly links to how many competitors you’re bidding against and how high they are willing to bid. Therefore, the most likely cause of a sharply rising CPC is an increase in platform competition.

For example, in 2020 COVID-19 caused a sudden uptick in digital advertising competition. The global pandemic fundamentally changed the world in 2020. As a result of widespread lockdowns, we moved our personal and professional lives online which led to an increase in online shopping and ecommerce sales.

2. Rising personalization capabilities

Another major factor in determining your CPC is Quality Score. Google’s Quality Score is a measure of expected click-through rate, ad relevance, and landing page experience.

The CPC ad auction directly factors in Quality Score. If your competitors’ Quality Score rises, so will your CPC.

Therefore, if your CPC is increasing, it’s likely your competitors are doing a better job at delivering a highly relevant ad campaign. And the path to a more meaningful ad experience is all about personalization.

Personalization means creating unique ad campaigns for each audience segment, rather than using a one-size-fits-all advertising strategy for your entire customer base.

Personalization should extend throughout the entire advertising journey. Ads should speak directly to the audience segment’s interests and pain points, and landing pages should match the narrative.

That raises a key question: If personalization is so effective, why are only a fraction of marketers using it?

The answer is that most advertisers don’t have the resources to create highly segmented ad campaigns and landing pages manually, as it’s very labor-intensive. According to Gartner, 65% of marketers find the process overwhelming.

3. Rising customer expectations

The entire online advertising space is a balanced ecosystem. As advertising technology evolves, so do audiences’ expectations.

For example, personalization helps advertisers show the most relevant content to each potential customer, improving the user experience. Users adjust their expectations as a result, elevating overall standards.

For example, customers now expect at least some degree of personalization. According to Google research, 61% of shoppers expect brands to tailor advertising experiences to their preferences.

Customer experience translates directly to Quality Score, as it measures an ad’s quality and relevance relative to a specific search. Therefore, advertisers who don’t adapt to higher customer experience expectations will end up with lower Quality Scores and rising CPC costs.

Lower your CPC to optimize your campaigns

Keeping your CPC in check is all about increasing the relevance of your messaging in the pre- and post-click experience.

Creating personalized, tailored ad sets and landing pages that target long-tail keywords is a key part of giving your audiences the experience they need. Instapage helps you create relevant experiences for all your audiences. Find out more about the #1 landing page platform for marketers by scheduling an Instapage demo here.

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