Why Is PPC Pricing Different Per Market?
5 Minute Read
Pay-per-click advertising is an auction-based system. Kind of like eBay for keywords, but instead of creepy Beanie Babies or J.D. Salinger’s used toilet, you’re bidding on the chance to get someone to click your ad.
The price to run PPC ads in a particular market is driven in part by what advertisers are willing to pay when bidding on specific keywords. PPC pricing can vary widely from one market to another, resulting in a high cost per click (CPC) for some while creating cost-effective advertising opportunities for others.
As we’ve written before, “He who spends the most, wins.” This is certainly true with pay-per-click ads, especially in competitive markets and industries. If you can’t afford to outspend your competitors, you need to get creative with your keywords and bidding strategies.
People talk, and we often hear complaints about PPC pricing from advertisers who compare notes with their peers and find that they’re paying more to run ads—sometimes a lot more. As experts in pay-per-click management, we understand the challenges of managing CPC while ensuring that ad campaigns meet our clients’ goals.
Factors That Affect PPC Pricing
The price to run pay-per-click ads in your market is dictated by a host of different factors:
- Industry: Some industries are more competitive than others. Ads for industries like legal, e-commerce, insurance, and finance have some of the highest CPCs.
- Keywords: The keywords you’re targeting will always affect cost, but not necessary in the way you’d expect. Some of our most expensive keywords have a really low search volume but high prices due to a combination of competitiveness and scarcity. Likewise, high search volume may lead to lower cost because there is more supply than demand. Ultimately, the cost per click for a particular keyword will depend on market factors.
- Quality Score: Google Ads Quality Score measures the quality of ads against the competition. The three main components of Quality Score are (1) how likely it is that users will click on your ad, a.ka., the expected click-through rate (CTR); (2) the relevance of the ad to search intent, and (3) the relevance and experience on your landing page. A better Quality Score means lower CPCs and better placement.
- If you’re running pay-per-click campaigns on Google and you’re tired of paying premium pricing, get that Quality Score up!
- Ad Rank: In Google ad auctions, the ad with the highest Google Ad Rank shows up first. The first thing Google evaluates is your bid, which is “the maximum amount you’re willing to pay for a click on your ad.” Advertisers who enter a higher bid AND meet other criteria (such as closer alignment with search intent, better ad quality, a superior landing page experience, etc.) will get a higher Ad Rank and come out on top.
- Number of campaigns: It goes without saying that the more pay-per-click campaigns you run, the more you spend on ads. But we just said it, so no one can say they weren’t informed.
- Advertising platforms: There are a number of options for search marketing via pay-per-click ads, including Google, Yahoo!, Bing, etc. Prices vary for each platform based on the size of the audience, advertiser activity, and more.
- Desired ad placement: All aspects of digital advertising are pay-to-play. If you want to dominate the competition, you need to be prepared to invest some serious cash.
- Seasonal effects: There are periods during the year that cause costs to increase. For example, during Black Friday and holiday seasons, more competitors enter the market to increase year-end sales that do not spend during other times of the year. Because budgets are not infinite, most advertisers have to pick when to spend—and most choose their high season.
Your goals are also intrinsically linked to your PPC advertising cost. If you need to sell X number of products or drive Y number of conversions per month, and your competitors need to do the same or even better, that’s going to make for a competitive marketplace for pay-per-click advertising. That, in turn, will lead to higher prices for PPC ads.
Unique Industry & Marketplace Factors
Business opportunities specific to a city or state can also impact PPC pricing in your market. Our experience managing pay-per-click ad campaigns for lawyers has revealed a unique example.
Arizona is the only state in the country that permits alternative business structures (ABS). This practice allows attorneys to share legal fees with non-lawyers. ABS is driving big money into personal injury law firms in Arizona by outside investors and financial institutions who want to drive more cases to the firm so they can share in the legal fees.
What does any of this have to do with PPC advertising cost? Phoenix and other major markets in Arizona have become super competitive since the introduction of alternative business structures. Some law firms are flush with cash and can afford to make crazy bids on pay-per-click ads. This makes competing for certain keywords in paid search very expensive.
How Can I Compete with High PPC Prices?
It’s important not to miss the forest for the trees when managing a PPC campaign. Lots of advertisers fixate on ranking for certain keywords, but the main focus should be meeting your KPIs. Are you getting the business you need through pay-per-click, or are you seeing diminishing returns?
Successful advertisers carefully monitor their cost per lead (CPL) or cost per product sold. This ensures that they’re not overspending on PPC ads or getting less than they put into their advertising.
Don’t be surprised that PPC pricing varies when advertising in multiple markets. PPC ad pricing is insanely expensive in some places. If you aren’t reaching your goals, consider:
- Bidding on less-competitive keywords
- Running different types of ads
- Exploring other platforms where you can reach potential customers
Twelve Three Media Can Manage Your PPC Campaigns
Listen, we know how hard it can be to dominate paid search and get the results you want. Our Paid Media experts have been running successful campaigns for decades. We know how to navigate differences in PPC pricing between markets, delivering exceptional results for clients in competitive locations and industries.
Are you unsure how to run successful pay-per-click ads without breaking the bank? Twelve Three Media offers comprehensive PPC management solutions for advertisers.