The digital advertising landscape is shifting as costs rise across key platforms. In Q2 2024, Google Search saw a 13% year-over-year (YoY) increase in cost-per-click (CPC), driving a 6% increase in paid search ad spend. While ad spending continues to grow, the pace has slowed compared to previous quarters, signalling a more cautious approach from advertisers. Rising CPCs mean the same budget now buys less qualified traffic, which will force marketers to get smarter about their channel mix and campaign efficiency.
Retail Media and Paid Social Show Continued Growth
Despite rising CPCs, retail media and paid social remain vital channels for advertisers. Retail media experienced a significant 21% YoY increase in spending, reflecting its growing importance in eCommerce marketing. Similarly, paid social ad spend rose by 13%, underscoring the channel’s role in driving brand awareness and engagement.
Rising CPCs in Google Retail Search
Retailers have faced steadily increasing costs for Google search ads over the past five years, with average CPCs rising by 40-50% during this period. More recently, from Q1 2023 to Q1 2024, median CPCs for retail search ads increased by approximately 20%, reflecting the ongoing inflation in digital advertising costs.
Performance Max Gains Traction
Performance Max (PMax) campaigns are quickly closing the gap with Standard Shopping Campaigns (SSCs). In Q2 2024, PMax conversion rates were only 5% lower than SSCs, a notable improvement from being 13% lower last year. Additionally, PMax CPCs outperformed SSCs by 2%, reversing a previous 11% deficit in Q4 2023.
The use of Performance Max (PMax) campaigns among advertisers continues to grow, with 89% of Google Shopping advertisers using PMax in Q1 2024, up from 82% in Q1 2023, signaling its growing role in eCommerce marketing.
What’s Next for Advertisers?
As digital advertising costs continue to rise, brands need to adopt a strategic approach to maximize ROI. Diversifying ad spend across multiple channels, leveraging AI-powered solutions like Performance Max, and focusing on performance metrics will be key to maintaining competitive advantage.
Diversify beyond Google and Meta
Over-reliance on the big two platforms increases cost pressure and can make it almost impossible for some campaigns to achieve a positive ROI. Consider exploring emerging channels where competition could be lighter and your ad budget can stretch further.
Use AI to improve campaign efficiency
Automation is now table stakes. Lean in to campaign automation to handle bidding, budget pacing, and negative keyword identification, but double down on human-led strategy for audience research, creative testing, and cross-channel management.
Optimize for ROI, not just clicks
Rising CPCs highlight the need to track beyond the click. Focus on metrics like cost-per-qualified-lead, customer acquisition cost, and lifetime value. A CPC increase of 20% may not matter if those clicks deliver higher-value customers.
We understand the complexities of the digital advertising landscape. Our team is dedicated to helping clients optimize their campaigns, explore new opportunities, minimize costs, and stay ahead of industry trends. Get in touch if you want to make your ad budget work harder. We’ll help you cut CPC waste, uncover higher-return channels, and align campaigns with the metrics that matter – qualified leads, client acquisition cost, and long-term growth.
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