What Causes CPC to Increase?
Many factors play a role in online advertising pricing, including supply and demand. In addition to industry shifts, multiple competitors congregate around the same keywords, and Ad relevancy score. In this article, we’ll review some of the factors that can cause a CPC to increase. You can also benefit from this article to understand the importance of ad relevance scores and the impact on ad price. There are two main factors that contribute to increased CPC.
Supply and demand dictate online advertising pricing
When it comes to advertising online, the governing factors are supply and demand. For example, audiences from English-speaking countries tend to command the highest CPM rates. While the US audience leads the pile, the differences in CPM rates across geographic regions may be due to the individual spending power and the established online advertising market in the respective country. Countries with strong economies may have higher spending power than smaller ones, but their online advertising market is relatively young and lacking in growth and development.
During the early part of the year, people spent more time online and on social media. There was a surplus of ad capacity. As a result, prices increased, causing businesses to tighten their budgets and wait for lower traffic costs. However, as the year progressed, COVID-19 swept the globe, reducing the demand for ad space. This left CPCs with a downward trend from March to December 2020.
In the United States, Amazon was responsible for 60% of all online retail sales in 2015. There are roughly one thousand new sellers joining Amazon’s marketplaces each day. As more sellers compete for first-page rankings, CPCs are expected to increase. Because of the growth, more companies are turning to PPC ads. As a result, the cost of PPC ads will increase. This trend will continue to take place until the end of the year, when the competition is low.
In addition to the CPCS price increase, the conversion rate is declining in many industries. Some of this is related to Google and Bing’s smart bidding targeting. By adjusting bids in real time, advertisers are staying profitable despite the decreasing conversion rate. Industry shifts can be disruptive and increase the cost of CPC. However, advertisers should understand the short-term trends so that they can react to them appropriately.
Multiple competitors congregating on the same keywords
Having multiple competitors congregating on the same keywords can be problematic. While the competition for top keywords is high, it can also increase the CPC. This is especially true in Google Ads. A Google Ads campaign will have a daily budget, and once this limit is reached, ads will no longer appear. This can lead to a waste of PPC advertising budget, and competitors in position two can steal top spot from you. Furthermore, there are professional fraud rings that target expensive keywords.
Ad relevancy score
If you’re worried that your ad relevance score is low, it’s time to re-think your strategy. You’ve probably seen the ads for pickup trucks, but they aren’t relevant to your audience. Similarly, ads targeting male teenagers aren’t relevant to female teens, and vice versa. Instead, focus on improving your CTR, which will increase your Relevancy Score.
Facebook’s Relevance Score is a formula that combines many metrics and identifies the most relevant ads to users. This information can make or break your campaign’s success or failure. This metric is especially helpful for Facebook, since it identifies areas for improvement. It’s also the best data you can get on what your audience responds to. Here are some tips for boosting your Relevancy Score:
1. Create a detailed buyer persona. A detailed buyer persona allows you to optimize your ad design and optimize it for your target audience. To learn more about your target audience, check out Facebook’s Audience Insights. Then, use customer research to learn more about their pain points and turn these into a value proposition. If your ad is generating positive customer feedback, your Relevancy Score will increase.
Improving your ad’s relevancy is essential for your ad to succeed. Using relevant keywords and phrases will increase your Ad Quality Score. The more relevant your ad is, the better chance of conversions. Furthermore, it will increase your CTR. Ensure that your ad is relevant to the search query. If your ad’s relevancy score is high, it will get a higher ranking, which will drive more customers to click your ad.
High value per conversion
The reasons for high CPC are varied, but it is most likely due to a change in the business mix or increased competition. As more businesses discover the potential of PPC advertising, cost per conversion is increasing as advertisers struggle to get the most value for their money. Increasing competition, higher-quality ad positions, and increased focus on quality content are contributing to the increased cost of advertising. Ultimately, CPC increases because of these factors. To reduce costs, consider tightening your conversion criteria.
You can calculate your CPC using Google Keyword Planner. High-quality keywords will generate more conversions and higher CPCs. For example, if you’re targeting a law firm that can make hundreds of thousands of dollars per conversion, your CPC will be higher than that of a retailer selling a box of gelatin for $2. However, if your goal is to increase your ROI, you’ll want to lower your CPC.
The easiest way to lower high CPC is by lowering your bid. You may lose ad position, but if your key performance indicators remain unchanged, you’ll likely see an increase in clicks. A lower CPC can even increase your ROAS. But be sure to keep in mind that you don’t want to sacrifice quality for profit. A higher quality score means a higher cost per conversion.
You can lower your CPC by choosing fewer competitive keywords. Increasing your bids for less competitive keywords can help, too. Another way to lower your CPC is to focus on improving your quality score. If you’ve got a low score, try to improve it by changing your keywords and ad groups. It will be cheaper CPC in the end. While you may have to adjust your budget, there are ways to keep it low and your profit margins high.