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Why is Google Ads So Expensive a Case Study.

2024-10-24 | 241 Print PDF

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Google Ads Shocking Rise in Cost and Why it is Expensive Than Before (CASE STUDY).

Why are Google Ads so expensive? This question must have crossed your mind if you execute paid adverts for clients. In the world of paid advertisement, there is no other name as popular as Google Ads; they are the most sought-after advertisement platform online. However, in recent years, I have noticed an increase in their advertisement cost, and this is something of great concern to me dating back to 2020.

How did I come to this conclusion? It’s no brainer that we have economic factors involved in the increase in Goods and services with the inflation crisis hitting hard on different turf around the world, like we don’t have enough to worry about especially if you are now in a highly competitive market of being a digital marketing agency or consultant. The high expectations of clients with their paid advertisements is no longer feasible and I mean that from a literal point of view.

Gone are those days when you set up your campaigns and expect to see results within a few days or weeks, now I do advise clients to have the conscious mind of running their campaigns for a few months (3 months standard) if they intend to achieve any form of traction, follow up and re-marketing strategies to take effect.

What this means is that the playing field has now been reduced to those who can spend more and bid more in this bidding war for auctioning ads; we have those crafting indigenous methods of going about their paid campaigns by creating different versions of the same campaign and others that duplicate same campaigns to have them run simultaneously, please do not confuse this concept with your A/B split testing of a campaign. To be candid before advertising platforms like Facebook introduced A/B split testing, ads managers had been playing around with this kind of concept but their goals were quite different.

While A/B testing was for you to pick the most performing campaign and get it to show more to your audience (as the most accepted ad template), the Ads manager used the other concept to try and play the system to get more impressions and increase click through rates while driving CPC low, in terms of cost per conversion it was of no significant value to most as long as they could gain lots of impression and clicks within a short period…to each Ads manager is their unique reasons to using these tactics.

I ran a campaign early this year on both Google and Facebook, and based on my experience with them I decided to share my experience from this campaign I deduced the fact that advertisement platforms are out to make money and nothing else (which is the forte of any business mind you), because by logic with the way the economy is as at now, do you think we have more people spending more on advertisement? Even as a business entity I understand that clients are tighter with their budgets and disposable income is at its lowest.

Old Google Ads Campaign Cost Result

New Google Ads Campaign Cost Result

If you Google the question as to why Google paid ads are more expensive nowadays you will get reasons as follows;

Competition: Based on competition there is an increase in cost-per-click (CPC) due to more advertisers targeting similar keywords, meaning we should expect more increase in CPC over the years, which also means that my statement about most businesses is actually doing well and making a great turn over and the economy backlash of inflation is all in my head.

However, it is a fact that for the past 5 years now we have had a slow decline in online advertising; meaning the perspective increase in online spending is not as rapid as it was before; which is due to both internal and external factors affecting the industry itself.

Algorithm: The other basis is the introduction of new algorithms like the way smart ads were changed and the introduction of Performance Max ads all these and Artificial intelligence influenced ads placements are added features and advantages that Google should provide to improve their users' ads performance versus other platforms like Facebook ads (Which Google service similar with the use of their Google display ads Network).

Unfortunately, Google seems to do all this improvement to favor higher-quality ads and increase costs for advertisers, I will show you a Facebook ads campaign that beats Google ads, in terms of performance, as of 5 years ago I will never recommend Facebook in terms of traffic generation to make sales for a product or service for the high top tier companies either in the B2B or B2C, but today am having a rethink about that. Because it is a known fact you cannot compare the quality of traffic generated from Facebook to the ones on Google. But if the best of Google ads (search ads) is now underperforming compared to the best of Facebook (display ads) then there might be an algorithm shift.

Mobile ads: In response to my last paragraph above the impact is visible with mobile ads, as it’s obvious that Google has less mobile reach than Facebook. It is a no-brainer that the mobile population dwarfs those using PC/tablet devices, and the volume of mobile internet users keeps increasing, online advertisers will keep targeting mobile ads.

Even though Google network ads are in synch with mobile app developers to place ads on their applications, most of us using mobile apps with ads do find them annoying and those apps that are relevant can only provide awareness with no solid click-through rates unlike messaging or social apps that provide options layout and delivery.

Click volume: Based on recent observations, most people are no longer readily engaging with ads, either because of the new change in consumer behavior or because they have a negative response to ads and are not keen on clicking them resulting in fewer clicks.

Back to my discussion at hand, it seems advertisement costs for paid ads have gone high and I mean high if you are an expert with years of experience you will notice this and the increase is as high as 50% to 100% depending on your level of experience and campaign management skills.

Using my experience as a case study when we executed a Google campaign for a client that wanted conversion for traffic sent to their landing page I will explain my observations with the campaign. Take a look at the image below you will notice that within the past week running a Google ads Performance Max we had spent a total sum of $241 with an impression of 361,000 and a click-through rate of 3.37% and the other metric I love as much is the conversion rate, which was at 29%.

The ability to track conversion from your clicks is one of the reasons I love to use Google Ads Performance Max. What I did with other ad types was to link their performance with Google Analytics (Which I still do with performance ads) and track the goals of each campaign type (this was during the Google Analytics Universal era).

But there was something fishy going on with my data because it was obvious that the initial budget I had proposed was no longer visible to deliver even the amount of impressions estimated for the campaign, I love to work my performance based on the number of impressions I can get for my clients as I mentioned earlier, advertisement platforms are in business to make money and it is left to you as an ads manager to make sure your clients' advertisement pennies are well spent. I focus on impression because it is the basis of all advertisements and with a good impression you also gain online awareness.

From my findings executing Google Ads performance max cost same as executing any other Google ads format since it is an all in one advertising reach. If you take a look at the two SWA- Google ads campaign performance from the image below.

To avoid being biased I will only focus on Google display ads types and omit search or other ad format types, you will notice the SWA performance max had the following results in terms of ads metrics like Impression, Clicks, Click-through Rate, Cost per Click, Cost, Cost per Conversion, and Conversion Rate, which are not relevant to display ads, I decided to take a forensic look at the cost of impression delivered with clicks and click through rates and my observation paid off.

Year	Ad Type	Impression	Clicks	CTR %	CPC $	Cost $	Cost/Conversion $	Conversion Rate %
Q1-2024	Achievify Max	453K	15.9K	3.51	0.02	347	0.06	37
Q4-2022	SWA Display	289k	6.67k	1.56	0.02	107.22
Q3-2022	SWA Max	265k	4.5k	2.52	0.02	142.16	0.04	51
Q2-2022	CIAPS Display	2.63M	8.95K	0.34	0.06	564
Q3-2020	LEADS Display	2.83M	33.1K	1.17	0.02	707
Q4-2020	LEADS Quanta	2.64M	36.8k	1.39	0.03	1.01K

 

From the table above you will notice the following, Q4-2020 to Q2-2022 impressions were in millions and the highest clicks we got was 36.8k (Q4-2020) at a cost of $1001 It was this advert that performed better in terms of click-through rate with a CTR of 1.39%.

Also Q3-2022 to Q1-2024 we have impressions in thousands, clicks have been halved due to the reduction in impressions, but with a great improvement in click-through rates, which denotes that even at a worst CTR of 1.56% our ads during Q4-2022 were far better than the best of Q4-2020.

It is obvious Google Ads has decided to focus on quality instead of quantity and to simply think Q4-2022 generated 1.56% CTR with a cost of $107.22 in huge contrast to $1001 for 1.39%CTR, this is only viewed at the surface, but a zoom in on the fact that both campaign are unique you will tend to understand that running same campaign using same template format will not yield same results. I.e. executing Q4-2020 Campaign in 2024 with the same format and ads template, you won’t get the same results in terms of better CTR.

Why did I say this? It is simple to take a look at Q3-2022 in comparison to Q1-2024; they are the same ad format and yet we are spending 0.02 more for conversion even though we are paying more than half the cost price of Q3-2022. Not only that, but the conversion rate is lower.

It’s a no brainer, we are spending more in Q1-2024 compared to Q3-2022 where half the cost we are pulling higher metrics figure than Q1-2024, if you double the cost of $142.16 you will have $284.32 which is $62.68 lower than Q1-2024 cost. Then double the Q3-2022 metrics and you will see new results as impressions hit 530k and clicks 9k (remember the more impressions you get the more your clicks), but using our logic Q1-2024 does better with clicks but at a higher cost factor.

Now on the note of paying more for quality is it better than paying less for quantity? Since it is obvious this is the path Google ads are now formulating. A simple glance at Q2-2022 versus Q4-2022 will reveal that we will have to pay more to get 2.63M impressions at $975.7 in contrast to $564, more over this is based on impressions but Google is trying to emphasize clicks for these ads format similar to what it does with search.

The above image is a screenshot of my Google Analytics integration with my Google ads so I can monitor the performance of the website traffic generated from the ads campaign. We have three slots in the image above.

Now from the results from the Google ads campaign I was doing well in terms of clicks so I wasn’t really worried about the impression fallout (although remember I mentioned getting an impression as a way to level your clients' product/service awareness).

Now from my Google analytics, I decipher a crucial point, I thought I was having quality clicks and higher click-through rates juxtaposing our older ads in the same category and ad format, but boy was I wrong. Literally, there was no difference with the approach of trying to get leads, even though we had higher clicks the results were bad compared to the older ads with lower clicks, but the signups were better (event goals).

From the first slot in the image above, I had 2250 visits on the landing page with only 232 actually getting to the registration page and 64 landing on the final page of submission. I can see how terrible the landing page was affecting the Google ads campaign (that was showcasing a good result).

I decided to design a custom landing page and name that offer page and have it linked to the registration page with the thank you page being the last page for me to monitor the success rate…that result was even worse as we had 2156 visits to the new landing page and 155 on the registration page and only 49 got to the thank you page.

With these two results I decided to reduce the activation flow of the web traffic to the landing page, hence directing them straight to the registration page, and remove the thank you page validation and have the validation be based on a return to offer page. This was because the visitors were not aware of email validation in their emails to click on to get to the thank you page and this was the page we use to confirm registration form submission.

I had to work with the web designer to develop another approach when they submit there should be a window for users to claim an offer by clicking the link sent to their email, this motivated users to actually click the links to verify their emails and we had the offer page replace the thank you page. Thus, we were able to achieve the result of 5132 visits and 253 offer page visits which translated to a 5% conversion rate.

With all this said, I was still bothered by the limited funds concerning the budget and the fact that I couldn’t attain any of my projected targets, so I had to do more investigation. The reason why this was not a good turnover for me at a 5% conversion rate is because this campaign was solely based on a FREE signup from website visitors, with zero obligation to buy, so I expected a better conversion on the landing page at 50% rate at least.

I decided to investigate my daily performance on Google ads;

From the image above you will notice that all my important metrics were doing fine in fact have tried to improve on them from previous observations from Google Analytics, finding ways to reduce cost and trying to schedule during periods I have high peak visits as well as work around improving my conversion rates, the initial cost per day was $40 and to see that I tried to maintain a gradual decrease in that daily bid budget.

Also from the image below you will notice that I really worked on measuring my conversion concerning the three-page elements that are important to the campaign, starting from the landing page, the registration page and the thank you page, which I later edited the respective pages associated with the conversion tracking when I changed the landing page to the registration page and the thank you page to the offer page.

Furthermore with all these good conservative metrics whenever Google advises me to increase my daily budget as part of their campaign recommendation I refuse to do that but remodel my bidding strategy, although I ended up getting a 100% campaign performance the traffic was not umpteenth. And under my daily campaign investigation, I realized that I was losing clicks which meant that the recommendation by Google for me to increase my Google daily budget was to this effect.

The fact that every time I tried to reduce the daily campaign budget bid I got a recommendation from Google to increase my budget was annoying because the original daily budget was $20 and for me to double that to $40 with no impact whatsoever on the other metrics left me perplex and my clicks were 66% down for that day.

With a result like this, I had to contact Google AdWords and lay complaints to their support the following were their response to my emails.

I went further to state my disbelief with the obvious cases I observed in the table data above and wanted to understand why the cost for impressions and clicks has increased they replied to me with the email response below.

During this period I implemented a new campaign strategy to try and get around not increasing my daily bids above $40 because my initial daily bid was $20 and I was always getting recommendations to increase my budget I believe it has to be the way I have set-up the campaign bidding and there was no harm in trying new bidding approach to maximize clicks and impressions for every penny being spent.

No matter how much I tried to improvise with the Ads setup there was this nagging feeling i.e. I needed to increase my budget! My budget was $700 for this entire campaign and I have spent close to half of that budget and have not even received half of my expected conversion from my Google Analytics tracking. This was bad and bluntly obvious that my way around this was to triple my budget if I was to get half of my initial expected result. I had to write Google Ads to show my disdain for this revelation.

Conclusion: If you intend to run any form of Google ads campaign I will suggest you triple your advertising budget for you to achieve the kind of basic results you would have achieved with your old ads before 2022.

This case study only points to the fact that the cost of ad spending has increased, and if you are thinking in contrast to Facebook ads, it is the same. The only difference is that Facebook CTR is much better but with more spam activities than usual. You can see this via the images below.

Old Facebook Campaign Cost Results

New Facebook Campaign Cost Results

The Facebook Ad above had a better CTR compared to the old Facebook ads, which is the only merit between the old ads cost on Facebook and the new ads cost Facebook but not to forget the terrorist spammers that are always waiting to hijack your ad traffic or solicit you to place ads on their platforms.

Recommended Read: How To Monitor Google Ads Performance Using Analytics

Recommended Read: Google Ads Performance Max Campaigns How To Set up

Recommended Read: How To Optimize Your Google Ads Campaign

So a higher CTR also means a higher chance of getting spammers and ad pirates targeting your ads on Facebook moreover, Facebook traffic still doesn’t have similar quality to Google Ads. It is important to understand that although the cost of advertising on Google has increased, Google Ads is still profitable for most businesses.

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