The cost per click (CPC) on Google ads continues to rise -- up 13% year-on-year in the first quarter of 2024 compared with 9% YoY in Q4 2023.
The change has mostly been influenced by an increase in Shopping ad CPCs for standard advertising and Performance Max (PMax).
Data from the Digital Ads Benchmark Report Q1 2024 is based on interactions of Tinuiti customers. The big independent performance marketing agency manages about $4 billion in digital media spend.
Google search advertising spend in the U.S. rose by 17% year-on-year in the first quarter of 2024. Click growth continued to slow -- hitting 4% YoY compared with 8% in Q4 2023.
The rise in Google search CPCs comes at a time when advertisers are seeing only small increases in the average value of orders (AOVs) generated by search ads.
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Google search AOVs were up by an average of 1% during the course of Q1 2024, just a slight increase from roughly flat growth in Q4 2023.
Retail brands on average that are running Google search ads have seen CPCs rise by 40% to 50% compared with five years ago. From Q1 2023 to Q1 2024, Google retail search advertising CPCs rose about 20% for the median advertiser.
The relative performance of PMax campaigns compared with standard Shopping campaigns (SSCs) improved across most key metrics from quarter to quarter, according to the report.
Conversion rates were about 5% less than those of SSCs, versus 13% less last year, and 17% less in Q4 2023. And PMax CPCs were 2% better than SSCs CPC, compared to it being 11% worse in Q4 2023.
PMax plays a major role in advertising on Google. During the Q4 2023 holiday shopping season, 91% of retailers that placed shopping ads with Google ran PMax campaigns, which remained stable during the first quarter of 2024.
Some 89% of Google shopping advertisers on average ran PMax campaigns during Q1 2024 00 up from the 82% average in Q1 2023.
During the height of the Q4 2023 holiday shopping season, 91% of retailers placing shopping ads with Google ran Performance Max campaigns. In Q1 2024 that rate dropped, but only very slightly. On average, 89% of Google shopping advertisers ran PMax campaigns during Q1 2024, which was up from an average of 82% in Q1 2023.
Video and other non-shopping ad inventory accounted for 23% of Performance Max spending in Q1 2024, down from 26% in Q4 2023.
Video cost share held steady between Q4 and Q1, but non-shopping search and display cost share fell by three points.
The non-shopping search and display for PMax costs include text ads, but Google prioritizes exact match keywords over Performance Max campaigns for scenarios where brands want greater control over their ad serving.
Amazon took a more aggressive approach in Google shopping ad auctions, and it began in Q1 2024 to kick off 2024.
Google shopping impression share for the first quarter was as high as it has been since at least 2020. In 2023, Amazon was already commanding a relatively strong share of Google shopping impressions for most of the year -- especially as investments in Temu continued to rise.
Temu, an online shopping megastore, offers nearly any product, in a similar way to Amazon. The number of retailers that consider Temu a top competitor for Google shopping impressions increased sharply in 2023 and peaked at a level that matched Amazon at the tail end of the 2023 holiday shopping season, according to the report.
Temu’s position in Google auctions slowed in the first quarter in 2024, but at its highest point 90% of retailers running Google shopping ads saw Temu as one of their top competitors in Google’s Auction Insights report. At the end of Q1 2024, that had dropped to 65%.