New report into CPC costs raises question of whether AdWords is still worthwhile

Posted by Rebecca Appleton on 16 Aug, 2017
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iProspect’s latest Quarterly Paid Search Trends Report has raised the question of whether or not AdWords is still a worthwhile option for small businesses as it emerges cost per click (CPC) is now at an all time high.

The Q2 2017 report identified a number of key trends but chief among them was the fact that continual increases in CPC in the period April – June has driven costs to their highest ever level.  Other notable findings from the analysis include:

CPC up, CTR down

The record high in CPC coincided with a decline in click through rate (CTR) across all devices. iProspect measured a 13% year-on-year fall and a 9% CTR drop on Q1 figures. The CTR fall was most notable on mobile devices, with a 17% quarter-on-quarter decrease.

Mobile costs increase

Despite fewer clicks, the CPC for mobile sharply increased – by 17% on Q1 and 52% year-on-year. The increase in cost on mobile doesn’t bode well for advertisers – despite the fall in click through rate this quarter, mobile’s share of clicks increased. The report calculates that 60% of clicks on PPC ads now come from mobile devices, compared with just 32% from desktop search and 8% from tablets.

Shopping shows growth

While the increased cost per click, higher cost of mobile ads and a fall in CTR all spell doom and gloom for advertisers, the iProspect study did also show a bright spot. Shopping volume grew ‘substantially’ to their highest point yet, recording 78% more impressions than in Q2 2016. Clicks were also up on shopping searches too, with a 49% year-on-year increase.

Shopping is another area where mobile showed the largest gains, with a 102% growth in volume of impressions and a 79% increase in click throughs.

Do all of these figures show that Google AdWords just isn’t worth it?

The data is very much a mixed bag. The report opens by stating that the research shows that paid search is an outstanding performance media channel. However, the figures also show that CPC is at its most costly ever, meaning some advertisers will simply find themselves forced out of the space.

More costly clicks mean businesses are also spending more to generate less traffic. With less traffic at a higher price, the question as to whether it’s possible to generate a worthwhile return from AdWords activity looms larger.

Search data consistently shows that search users are migrating to mobile devices. Businesses are urged to think mobile first. However, the Q2 Quarterly Paid Search Trends Report shows costs are increasing there too, up 52% compared with this time last year.

On the flip side, shopping searches are now at a record high and show all the signs of continuing to grow. Clicks on shopping searches are also up, which is good news for retailers.

iProspect also states that after the changes to Ad Rank in May and the still slightly lower cost per click on mobile, the cost of non-branded keywords has declined by around 4%. This somewhat offsets the 8% increase it has observed in the cost of branded terms.

The report is clear that advertisers will likely need to spend more over the remainder of the year just to maintain positions. However, with more sophisticated targeting, highly relevant ads and upcoming features such as In-Market Audiences for Search and Shopping, it should still be possible to eke out a return.

The complete iProspect Quarterly Paid Search Trends Report can be downloaded here. 

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