For businesses aiming to maximise their return on investment (ROI), one of the key metrics for understanding the underlying features of advertising costs in Google ads is the cost per click (CPC). CPC influences the effectiveness and efficiency of online campaigns directly.
Understanding the prevailing CPC benchmarks for Google ads across diverse sectors is important as we progress in 2024 to maintain competitiveness and allocate budgets accordingly.
Let’s first study the concept of CPC in Google ads before exploring the industry-specific benchmarks and their implications.
Table of contents:
- What is the cost per click (CPC) in Google Ads?
- Why is CPC important in Google Ads?
- Google Ads average CPC industry benchmark
- How does CPC impact performance and revenue?
- How is increasing CPC affecting businesses?
- Best ways to reduce cost per click in Google Ads
- Professional help to manage CPC
What is the cost per click (CPC) in Google Ads?
Cost per click (CPC) in Google Ads refers to the amount the advertiser pays when a user clicks on their ad. This metric is central to PPC advertising.
CPC is determined by the total amount spent on clicks divided by the total number of clicks received.
Example
Let’s say you have an online shop that sells running shoes. You can check the average CPC cost in the Google Keywords Planner tool for specific keywords like running shoes, high-performance running shoes etc.
The CPC in Google Ads goes higher when more and more businesses compete for similar keywords to get more traffic to their website.
Why is CPC important in Google Ads?
CPC directly impacts your clicks, conversions and ROI. It influences how much advertisers are spending on Google Ads campaigns. With CPC you pay only when someone clicks on your ad.
CPC is the primary factor in Google Ads and it is directly linked to your budget allocation and possible number of clicks and conversions you may get from your campaigns. Google rewards ads that are relevant to users with a lower cost per click. A higher quality score can reduce CPC and make it more likely for ads to get higher positions and more clicks.
Understanding CPC trends can help businesses analyse the level of competition and strategise the ads accordingly.
If you want to increase Google ads conversion rate, you must have a solid understanding of Google Ads CPC.
Google Ads average CPC industry benchmark
These benchmarks provide a snapshot for business owners about what amount to pay per click within their respective industries. The average CPC in Google ads vary significantly between different industries due to parameters like varying levels of competition, the popularity of the keywords, etc. Many industries benefit from relatively low CPCs on the Google Display Network.
The average cost per click in Google ads across all industries is $2.69 for search and $0.63 for display.
Here is the data in tabular form showing the average CPC for both the Search Network and the Google Display Network (GDN) across various industries: Data is sourced from here.
| INDUSTRY | AVERAGE CPC (SEARCH) | AVERAGE CPC(GDN) |
| Advocacy | $1.43 | $0.62 |
| Auto | $2.46 | $0.58 |
| B2B | $3.33 | $0.79 |
| Consumer Services | $6.40 | $0.81 |
| Dating and Personals | $2.78 | $1.49 |
| E-commerce | $1.16 | $0.45 |
| Education | $2.40 | $0.47 |
| Employment Services | $2.04 | $0.78 |
| Finance and Insurance | $3.44 | $0.86 |
| Health and Medical | $2.62 | $0.63 |
| Home Goods | $2.94 | $0.60 |
| Industrial Services | $2.56 | $0.54 |
| Legal | $6.75 | $0.72 |
| Real Estate | $2.37 | $0.75 |
| Technology | $3.80 | $0.51 |
| Travel and Hospitality | $1.53 | $0.44 |
How does CPC impact performance and revenue?
CPC is an important metric that directly impacts revenue and performance. Let’s understand how CPC impacts Google Ads or gets affected by other factors.
Ad positioning
The ad positioning is directly related to the CPC cost, there are a few other factors but cost-per-click is one of the key elements that decides what position your ad will be placed in Google Search.
Ad positioning is vital in determining the visibility of your ads on Google search. The position of your ad is influenced by several factors, including your CPC bid amount, quality score, and the competitiveness of the keywords. Higher CPC bids can improve your ad positions on SERP increasing visibility, click-through rates and more traffic to your website.
It is important to balance your bid with your budget to ensure that the cost of achieving a higher ad positioning does not outweigh the profit margin.
Quality score
The quality score of keywords in Google Ads is impacted by CTR, Ad Relevance and landing page experience. Note that if you wish to boost your CTR, your CPC cost is directly linked as discussed above.
Quality Score in Google Ads is a measure that combines the relevance of the ad, the expected CTR, and the quality of the landing page experience. CPC plays an indirect role in this metric. Since CTR is a key component of the Quality Score, a higher CPC can improve this score.
A higher quality score can lower CPC while providing premium positions to ads. Ads with higher relevance and better landing page experiences contribute to a higher Quality Score, which in turn can reduce CPC and improve ad performance.
An ad must align well with the search intent and provide a user-friendly experience on the landing page. Even with a high CPC, poor ad relevance or a bad landing page can harm the Quality Score, leading to higher costs and lower ad positions.
Thus, optimising these aspects along with CPC is essential for effective ad campaigns.
Budget allocation
Without knowing your CPC cost, you can’t plan and allocate a monthly budget to run your campaigns with the highest efficiency to get the best ROI. If you do not have a detailed understanding of your CPC bids then you will also struggle to forecast ad spending when you really need to scale or even reduce the impact.
Effective budget allocation is essential for running successful Google Ads campaigns. By analysing your CPC data, you can identify which keywords and ads are performing well and allocate more budget accordingly. This ensures that you get the best return on investment (ROI) and avoid overspending on ads that underperform.
Higher CPCs need more investments. This can reduce the number of clicks and impressions that a campaign achieves within a fixed budget. Carefully manage your budget to ensure you get sufficient traffic without overspending.
Make informed decisions about when to increase or decrease bids by understanding your CPC and aligning with your campaign goals and budget.
Return on Investment (ROI)
A higher CPC means each click is more expensive than expected, affecting the overall ROI. CPC influences the cost of getting a potential lead. Setting a CPC that strikes a balance between visibility and cost can maximise ROI.
ROI measures the profitability of your advertising efforts by comparing the revenue generated to the costs incurred. CPC directly impacts your ROI, as higher CPCs can lead to increased costs.
To maximize ROI, balance CPC and conversion rates. Continuously monitor and optimise your campaigns to ensure that the cost of acquiring a click is justified by the revenue generated from that click.
Competition
Competition in your industry plays a vital role in determining CPC. High competition for popular keywords can drive up CPC, making it more expensive to achieve top ad positions.
Understand your competitors’ bidding strategies and CPCs to develop a more effective bidding strategy. By analysing competitor Google Ads budget and CPC data, you can identify opportunities to bid on less competitive keywords or adjust your bids accordingly.
Keep an eye on industry trends and changes in competitor behaviour to anticipate shifts in CPC and adjust your strategy to be in the competitive landscape. This can help you optimise your ad spend.
Ad quality and relevance need to be optimised to maintain competitiveness as industries with higher CPCs face intense competition.
Click-through rate
A higher ad position generally receives more clicks and to achieve a higher position, your bid is the key.
Ads in top positions receive more visibility and are perceived as most relevant by users. Advertisers often need to pay more to be featured in the top positions in Google Ads. Along with Ad position, compelling Ad copy is also directly linked to click-through rate.
To achieve these higher positions advertisers often need to increase their CPC bids. While this can lead to more clicks and potentially more conversions, it also increases the cost of your advertising campaign. Therefore, it’s essential to monitor your CTR and adjust your bids strategically to maximise the return on your investment.
Conversion rates
Conversion rates measure the percentage of users who take a desired action, such as making a purchase or filling out a form, after clicking on your ad. Higher CPC bids can attract more relevant and high-quality traffic, potentially leading to higher conversion rates.
If high-quality traffic is targeted with a high CPC, the probability of conversion rates is higher.
For instance, an ad for “emergency plumbing services” with a higher CPC is likely targeting users who need immediate assistance, leading to a higher conversion rate.
Ensure that the increased cost of clicks is justified by the value of the conversions. This involves optimising landing pages, ad copy and targeting the right audience who are more likely to convert. Focus on improving conversion rates to maximize the value of your ad spend and overall campaign performance.
Return on Ad Spend (ROAS)
Return on Ad Spend measures the revenue generated for every dollar spent on advertising. It is a key metric for evaluating the efficiency of your ad campaigns. Higher CPCs can improve ad performance and revenue but they also increase costs.
This return is directly influenced by CPC. Low CPC with steady conversion rates increases ROAS, indicating a profitable campaign.
To maximise ROAS, it’s important to balance CPC with the revenue generated from conversions. Optimise your campaigns to ensure that your ad spend is generating a positive return.
By focusing on high-performing keywords, ads, and targeting strategies, you can improve your ROAS. Overall profitability increases too.
Traffic volume
Traffic volume is the number of visitors to your website generated by your ads.
A lower CPC can result in higher traffic volume because the advertiser can afford more clicks. High traffic volume can be beneficial for brand awareness but might not attract potential customers resulting in low conversion rates.
By targeting the right keywords and optimising your ad copy and landing pages, you can attract high-quality traffic that is more likely to convert.
Monitoring and analysing traffic data can help you identify trends and opportunities to further optimise your campaigns. Relevant traffic can help achieve a better overall campaign performance.
How is increasing CPC affecting businesses?
As CPC rises, businesses face major consequences impacting their performance metrics, advertising budgets, and potential profitability.
- Reduced click volume: A higher CPC implies a smaller number of clicks within the same budget, which significantly decreases overall traffic and lead generation in Google ads.
- Increased advertising cost: The overall advertising budget increases as you spend more for each click on the ad.
- Higher customer acquisition cost (CPA): An increase in CPCs elevates the cost of acquiring new customers (CPA). This might squeeze profit margins for small businesses.
- Competitive dynamics: Higher CPCs intensify competition as businesses bid more to secure top ad positions. Businesses with limited budgets can find it challenging to compete with larger firms that can afford higher CPCs.
- Refine advertising strategies: Businesses might need to explore other marketing channels, invest in SEO and content marketing to mitigate the impact of higher CPCs, and maintain sustainable growth by reducing dependency on paid ads.
For a detailed exploration of how increasing CPC is affecting businesses, you can read more why is Google ads so expensive now.
Best ways to reduce cost per click in Google Ads
Reducing CPC can significantly enhance the efficiency of ad campaigns. Let’s discuss some strategies to lower the CPC.
- Keyword optimisation: Focus on long-tail keywords in Google ads that are low in competition and highly relevant for your business.
- Ad quality improvements: improve the ad quality by creating compelling ad copy, ensuring a very user-friendly landing page experience, using relevant keywords, etc.
- Bid adjustments: Based on the performance data, adjust bids while focusing on high-performing times and devices.
- Negative keywords: Use negative keywords to prevent ads from appearing on irrelevant searches. This strategy reduces wasted spend, reduces CPC, and improves CTR.
- Audience targeting: Adjust your audience targeting to reach more relevant users who are more likely to convert in Google ads.
For more comprehensive strategies for reducing CPC, you can visit the main guide on how to reduce Google Ads costs and lower CPC.
Professional help to manage CPC
If you need help from a local Australian Google Ads expert to help you manage your CPC, budgeting, competition analyses and more then get in touch with us today.
Book a time with our principal Google Ads consultant Pankaj Yadav.
Quality guaranteed. Learn more about our Google Ads packages in Australia.
