Google search advertising spend in the U.S. saw a 17% year-on-year increase in the first quarter of 2024, according to a recent report. However, the growth in ad spend showed signs of deceleration, as click growth slowed to 4% YoY compared to 8% in the previous quarter.
One notable trend revealed in the report was the continuous increase in the cost-per-click (CPC) for Google search ads. The CPC rose by 13% YoY, a significant jump from the 9% increase seen in the previous quarter. This increase was largely driven by a rise in Shopping ads CPC, both standard and PMax.
For retailers specifically, CPCs have been on the rise for the past five years. In fact, the average retail brand running Google search ads has experienced a 40-50% increase in CPC compared to five years ago. From Q1 2023 to Q1 2024 alone, Google retail search ad CPCs rose by approximately 20% for the median advertiser.
While the increase in CPC may be concerning for advertisers, there was some positive news for those utilizing Performance Max (PMax) campaigns. PMax campaigns showed improvements in key metrics compared to standard Shopping campaigns (SSCs). The conversion rate for PMax campaigns was only 5% lower than that of SSCs, compared to a 13% and 17% difference in previous quarters. Additionally, PMax cost per click was 2% better than SSCs CPC, a significant improvement from the 11% worse CPC seen in the previous quarter.
PMax campaigns also continued to play a prominent role in advertising on Google. During the Q4 2023 holiday shopping season, 91% of retailers running shopping ads with Google were using PMax campaigns. This remained stable throughout Q1 2024, with an average of 89% of Google shopping advertisers utilizing PMax campaigns, up from 82% in Q1 2023.
The increase in CPCs and the decrease in clicks is bad news for advertisers. It is particularly concerning since Google has reportedly been raising ad prices to meet targets. The continuous rise in CPCs coupled with slower click growth poses challenges for advertisers trying to maximize their return on investment.
The report mentioned in the article, the Q1 2024 Digital Ads Benchmark Report, utilized anonymized performance data from advertising programs managed by Tinuiti. The figures represent same-client growth and are not meant to officially reflect any specific advertising platform’s performance or the experiences of every advertiser.
In conclusion, the report highlights the ongoing increase in CPCs for Google search ads, particularly affecting retailers. While this presents challenges for advertisers, the use of PMax campaigns has shown positive improvements in key metrics. Advertisers will need to strategize and adapt to these changing trends to optimize their advertising efforts on Google.
