Highs and Lows in Google Search

Written by Jonathan Baker

Interesting discoveries have been reported regarding Google; specifically, high cost-per-clicks (CPCs) but low average order value (AOVs).

Wide differences

A recent article in Media Post addressed these differences, pointing out how CPCs are not only on the rise (currently at 13 percent), but surpassing where they stood last year. Conversely, AOVs have, as of this writing, increase only by 1 percent. Why such a noticeable contrast?

First, a refresher about CPCs

With CPCs, calculations are based on how much it costs to attract potential customers to the website of a brand or business, such as an ad campaign. This cost is divided by the number of conversions. When the CPC is subtracted from the AOV (see below), it provides a good idea of the brand’s average profit per order.

And now, AOVs

Since AOVs track average dollar amount that is spent whenever an order is placed on an eCommerce site. (The figure is calculated by dividing total revenue by the number of orders.) Ultimately, revenue can be boosted when the online brand or business increases the average amount customers are willing to spend.

Now, the reasons for the current disparity in CPCs and AOVs…

Performance Max and Shopping ads

Now, a refresher on two types of advertising models:

  • Performance Max (PMax): A completely advertising automated campaign that enables brands and businesses to access their Google Ads inventory from a single campaign. PMax helps advertisers see considerable increases in conversions at similar costs-per-action.
  • Shopping ads: Ads that may be created from the data of a brand or business that offers detailed information about specific products offered—complete with descriptions and photos.

In the last year, there has been an increase in CPCs for Shopping ads and PMax—and this has greatly accounted for the differences noted above.

PMax versus Shopping campaigns

Many brands and businesses chose to run PMax advertising campaigns during the holiday season of 2023. In comparison to standard Shopping campaigns, this proved beneficial as sales were very successful. Additionally, in the first quarter, PMax campaigns have maintained strong stability. Speaking of the first quarter…

Where Google search advertising stands…

Complementing the differences connected with PMax and Shopping ads, the Media Post article also noted how Google search advertising increased by 17 percent during the first quarter, while click growth declined from 8 percent to 4 percent.

A lot to digest and analyze.

What does this mean for the future?

Will strategies be implemented to step up improvements to AOV? Or, will the automated efficiency offered by the relatively new PMax, complemented by Shopping ads, become the standard?

The EGC Group is staying in tune with the developments and changes in measuring and gauging ad performance. For more information on how we can help you get a clearer understanding of how to improve your online sales, get in touch.