Google Adwords Cost Per Click Declined For Second Consecutive Quarter

The cost per click paid by Google’s Adwords clients could not keep climping forwever.  After years of increases, the average cost that advertisers pay Google has finally started to decline. The average cost per click paid by Google’s U.S. advertisers decreased 8% during the 4th quarter of 2011 versus both the previous and year ago quarters . Not only is this the second consecutive quarter of decreases in cost per click, but also the first time that the cost per click has declined on a year over year basis. The average cost per click declined by 5% last quarter on a sequential basis.

The peak in cost per click had to arrive at some point.. The churn of PPC advertisers with those dropping out or reducing their bids may finally be at a level where Google can not recruit new advertisers fast enough to replace the ones that are reducing spending.

Another cause of the declines in cost per click could be due to advertisers holding budgets constant while obtaining an increase in clicks. Google announced a phenomenal increase in clicks, and thus total their revenue was up. It may even be the case that some advertisers had increases in total spending despite spending less per click due to the increase in total clicks and getting more traffic for less per click. Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of their AdSense partners, increased approximately 34% over the fourth quarter of 2010 and increased approximately 17% over the third quarter of 2011..

Has the cost of acquiring traffic via Adwords finally become so expensive that bid inflation has peaked? It certainly would be a relief in an economy that is crunching margins to not have to factor in an inflation factor for Google Adword clicks into the marketing budget.

Leave a Reply

Your email address will not be published. Required fields are marked *