The Rising Costs of Google AdWords

Google AdWords is pretty much ubiquitous in marketing and media plans at this point. But are the rising costs of the service producing an equitable increase in results?

iProspect, a global marketing agency, recently released a report on paid search trends, looking at the ever-rising costs of Google AdWords and the impact this has on companies.

Our media team found this report particularly interesting because it aligns with what we’ve been seeing firsthand with our client’s accounts—an increase of up to three times as much cost per click than previous years. Not necessarily surprising, when you consider AdWords’ popularity has almost inevitably resulted in an increase in competition and a limited supply within the ad space.

The iProspect report analyzed 176,000 campaigns and saw an increase in cost of 42 percent for mobile, 26 percent for desktop, and 17 percent for tablet devices year-over-year. This places a heavy burden on campaigns, as clients tend to maintain budgets year-over-year and don’t increase for the real-time rise in supply costs.

With growing costs, volume decreases since there are only so many clicks companies can afford. The rise in mobile puts advertisers in a complicated position. Since users search more on mobile devices and buy more on desktop, mobile is a great upper funnel tactic. From what the data tells us, it’s also an expensive tactic. With the media budgets being spent on mobile devices, there is little budget leftover for users searching on desktop.

This has a huge impact on what advertisers pay per conversion, because the majority of the budget is going toward exploratory tactics. Agency media buyers are having to do a lot of talking to convince clients to change their strategy. Having spent the last several years pushing the importance of mobile advertising, clients are a bit confused as we come back and say we need to shift dollars back into desktop.

Like everything in marketing, agencies--and their clients--have to adapt quickly or be left behind as others take clicks and own search terms. Sure, it's frustrating to spend so much time figuring out a tactic or technology that then makes a major shift, either on its own or due to market response. But it's better than the alternative: clinging desperately to the old ways while watching competitors outstrip you.