3 Trends That Explain Why Your CPC Is Rising

3 Trends That Explain Why Your CPC Is Rising

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 the digital advertising world, and small optimizations to your PPC ads may not be enough to overcome them. 

At Postclick, we’ve identified three rising market trends that explain why CPC is increasing for some advertisers:

  • Platform competition
  • Personalization capabilities
  • Customer expectations

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.

What is causing a sudden uptick in digital advertising competition? COVID-19 is likely the driving force.

The global pandemic fundamentally changed the world in 2020. As a result of widespread lockdowns, we moved our personal and professional lives online.

We also took our shopping online, opting to shop on ecommerce websites to avoid entering stores. One eMarketer.com report projected ecommerce sales would rise by 18% in 2020, while brick-and-mortar retail spending would decrease by 14%.

eMarketer report

To adjust to this change in consumer behavior, businesses moved online and marketers diverted funds from traditional to digital channels. Digital is now uncontroversially the lowest-risk and highest-return advertising channel.

This trend shows no signs of slowing. A whopping 72% of marketers think the pandemic’s impact will last at least through Q3 2021, with 33% believing the impact will last beyond 2021. Of course, this is speculation, but this mindset will impact marketing budgets and strategies when planning for 2021.

According to Postclick’s 2021 Digital Advertising Trends Report, two in three marketers expect their digital advertising budget to increase in 2021.

Digital advertising budget

With respect to the potential impact on CPC, these three channels stand out:

  • 71% of marketers predict an increase in their paid social budget.
  • 60% of marketers predict an increase in their paid search budget.
  • 49% of marketers predict an increase in their display budget.

To compensate for these expected increases, 50% of marketers plan to spend less on events and 33% intend to spend less on direct mail.

What’s striking about these numbers is how prevalent Facebook and Google advertising already are: 87% of marketers are already using one or both platforms.

Around half of marketers expect their Google and Facebook advertising costs to increase in 2021. This increase is for good reason. For 44% of marketers, Google delivers the most return on ad spend. Facebook came in second place, with 25% of marketers saying it’s their top-performing platform.

What makes Facebook and Google so influential? Both platforms are contextual, empowering advertisers to reach potential customers during high-intent moments. To keep audiences engaged, they prioritize highly relevant content that ensures an excellent user experience. For these reasons, they’re well-positioned to remain in top spots.

All these stats point toward rising competition on both Facebook and Google Ads. More competitors with higher bids in the marketplace mean higher CPC for everyone. The result is a hyper-competitive landscape where only the most advanced advertising strategies and tactics prevail.

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 post-click landing pages should match the narrative.

Why should marketers focus on personalization? According to Google, 90% of marketers say personalization delivers profits. Plus, McKinsey research found that early adopters of ad personalization have seen up to 15% more revenue. These statistics make sense, as consumers are most likely to jump at timely and pertinent offers.

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.

Thankfully, Post-Click Automation technology has made personalization possible at a scale previously thought impossible. Using data science and machine learning, PCA technology allows advertisers to personalize both the pre-click ads and the post-click landing page experience.

In our survey, we found that marketers using tech-enabled services to accomplish their digital advertising objectives were 4.4 times more likely to be “very satisfied” with their conversion rates. As a result, 55% of surveyed marketers plan to increase their investment in agencies or tech-enabled services in 2021.

The outcome is a landscape where the advertisers with the most resources win. As their Quality Scores increase and Google adjusts to greater relevance of those with the resources to personalize at scale, others will suffer, as they will be less relevant in comparison. Any advertiser that doesn’t adapt is bound to see their CPC rise over time.

3. Rising customer expectations

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

For example, machine-learning technology like Post-Click Automation 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 with Post-Click Automation

To counter rising ad costs, forward-thinking advertisers are shifting to Post-Click Automation.

PCA allows marketers to automate and personalize the post-click landing page experience, delivering highly personalized experiences that keep Quality Score up and CPCs down.

Postclick’s PCA platform relies on four pillars:

  • Ad mapping, which connects each ad to a separate post-click experience.
  • Automated creation, which produces hundreds of landing pages at once with reusable content blocks.
  • Personalization capabilities, which pass audience parameters from the pre-click stage to the post-click stage, so advertisers can tailor each landing page to specific audience members.
  • Optimization and AI, which collects data and suggests page layout improvements over time to boost conversion rates and Quality Scores.

Postclick is a tech-enabled service that combines the industry’s only PCA platform with a team of conversion experts.

To show you the impact we can make on your PPC campaigns, we’d like to offer you a complimentary analysis of your ad campaigns. We’ll review your ad campaigns to analyze your post-click health, compare your site against your competitors, and identify significant opportunities to increase your Quality Score and CPC. Request your analysis here.

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