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Relevant Search Ads Driving Down Costs Per Click

Smartphone-Happy-Person-BAdvertisers pay less per click these days, although many continue to invest more in paid-search ads. After peaking at an average of $0.46 per click in the third quarter of 2012, the cost continued to fall in Q1 2013 globally, reaching a five-quarter low of $0.39 for Kenshoo clients. Lower costs reflect the ability of marketers to improve targeting and messaging techniques.

This average cost per click (CPC) fell just below $0.41 noted in Q1 2012. The average CPC in the U.S. and U.K. declined to $0.38 and $0.44, respectively, while continental Europe CPCs remained flat at $0.36, according to the 2013 Kenshoo Global Search Advertising Trends Q1 report published this week.

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It turns out that marketers are seeing improvements in conversion rates across Google and the Yahoo-Bing Network. Aaron Goldman, Kenshoo CMO, attributes much of that to the increased relevancy of search ads. In the report, Kenshoo examines the performance of paid-search marketing by analyzing campaign data associated with several billion dollars of ad spend managed through Kenshoo across global search engines.

Kenshoo saw global click-through rates (CTRs) and click volume spike in the first quarter of the year. Q1 2013 global CTR rose 62% to 1.68% compared with the year-ago quarter, and click volume rose 21% year-on-year (YoY). Meanwhile, impression volume declined 26% compared to Q1 2012.

For the most part, marketers spent more on paid-search ads worldwide. But while the U.S. saw a 15% boost in global paid search, ad spend was fueled by a 24% increase in U.S. search ad spend, while European investments fell 11% YoY in the U.K. and 4% for the rest of continental Europe.

While falling CPCs benefit advertisers, what else can we expect from the trend? Goldman explains how CPCs inversely tie to CTRs. When CTRs rise, CPCs fall. Advertisers creating tightly targeted campaigns and search engines improving relevancy algorithms to match ads with queries are the two main drivers. Consumers get more relevant ads, advertisers get more effective rates, and search engines gain higher revenue yield.

When it comes to mobile, devices now account for 19% of all U.S. paid-search clicks, but just 14% of the amount spent. Mobile device CPCs in the United States remain low in comparison with computers. Compared with computers, clicks from mobile phones cost 46% less; and tablets, 18%. At $0.46 per click, tablets are just $0.10 behind computer CPCs and 53% more expensive than phone clicks, according to the Kenshoo report.

"Happy Smiling Girl With Mobile Phone photo from Shutterstock"

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