Average Google Adwords Costs Unchanged for 2nd Quarter

Quarterly, Creative Development looks at the relative average cost of adwords for a range of over 100 keyword groups in the three major markets of the UK, the US and Australia. This quarter the keyword pool was updated to reflect broader changes in the market.From September 2010 a range of keywords were selected and Google’s keyword tool was used to find out the average cost of each keyword, and the changes relative levels of competition for each keyword. Using that data Creative Development built an average cost of those keywords and an average change in competition. The data also can be used to see if there has been any changes in the cost of advertising relative to the competition.

Generally, the CPC for each keyword is calculated as a function of advertiser’s bid, quality score and competition. Creative Development assumed that things like quality score will remain relatively the same across all competitions. As CPC bid and competition are connected (the more advertisers bid, the more the competition, the higher you have to bid to advertise) then the ratio of CPC to Competition should remain relatively the same. If more advertisers are bidding, there is an increased competition, and the average CPC should rise at a similar rate, and fall at a similar rate.

Over the last three months, the average CPC has remained the same. The cost of advertising relative to competition, however, has fallen slightly.This means that there has been an increase in competition across the three markets that is proportionally greater than the change in the cost of advertising.

There are a two possible explanations for this. Either advertisers have increased their quality score, or Google has changed the calculation or advertisers are willing to bid a lot less for each keyword.

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