Google's Cost Per Lead is Up—Here’s Why and What You Can Do

Who

The industries hit hardest by these trends are Arts and Entertainment (cost per lead has grown over 130%,) Travel (cost per lead up nearly 70%,) and Furniture (up more than 50%.) But many other industries are affected, as well. 

In truth, any industry that's dealing with the sweeping supply chain issues as well as any industry that felt wild fluctuations during the pandemic are now in danger of seeing their ad cost go up and their return on investment go down.

Why

There is no single answer here. The increase in cost per lead and decrease in conversion rate is nuanced and is hitting some industries harder than others. But if one is forced to point to a single cause, it would be inflation. Coming in at second and third place would be increased competition and the wider application of board keywords. 

Inflation

This year, inflation reached 8.5%, the highest since 1982. This means consumer spending power is declining while the cost of running a business is on the rise. Consumers are being more selective about where and how they spend their money, which results in businesses spending more to attract paying customers. 

Competition

During the pandemic, online spending increased by 55%. If that figure doesn’t mean much to you, consider this: In the last two years of the pandemic, Americans spent $1.7 trillion online—more than double what they spent online in the two years prior to the pandemic. 



As more consumers turned to their phones and laptops for shopping, more and more businesses began using Google Ads, thereby increasing competition for ad space and clicks. 

Broad Keywords

There’s definitely a place for board keywords in PPC campaigns. In fact, Google’s Smart Bidding approach recommends the use of broad keywords. But casting a wider net with broad match keywords means more people are seeing your ad and clicking it, but aren’t actually interested in what you have to offer. In other words, you’re paying for the click but the conversion isn’t happening. These people aren’t becoming paying customers. At least not for you. 

What You Can Do 

The increasing cost for ads and clicks, coupled with declining conversion rates, is naturally a concern for all businesses. But local businesses are especially vulnerable, given their smaller budgets and tighter profit margins. 

Fortunately, you can plan out a course of action to help your business weather the storm. 

Inflation

Obviously, there isn’t much any of us can do individually to combat inflation in the US economy. However, as a business owner you can take steps to minimize spending and adjust your pricing to lessen the impact on your bottom line. 

From a marketing perspective, if paid ads are no longer producing an ROI you’re comfortable with, there are plenty of low-cost or no-cost marketing strategies you can implement alongside (or instead of) your PPC campaigns. 

Competition

Dealing with competition is nothing new. Likely, you’ve already built a marketing strategy with your competitors in mind. As marketing becomes more expensive and perhaps less effective than it once was, pay close attention to how you’re spending your marketing dollars. 

If you don’t have a clear, specific customer profile, build one now. Competing for clicks is only worth it if the right prospect is clicking your ad. 

Broad Keywords

If you’re using broad keywords as part of your PPC campaign, be sure you’re doing it the right way. That means including strong negative keywords to weed out people who aren’t actually searching for your services. It just doesn’t make sense to attract a wide range of people to your brand when many of them are not interested in your service in the first place. 

Want to learn more about using paid ads to grow your business? Need help managing your PPC campaigns? Locallogy can help. Give us a shout!