KPI Monitoring & Diagnosis: Why Does your CPC and Cost Change?

In our continuing series on KPI Monitoring & Diagnosis, today we’re going to dig into investigating changes to your cost per click, which is either very easy to examine or complicated as the factors that can affect CPC can be a bit varied depending on the changes you have made, and your competitors have changed.

As a reminder, this data doesn’t exist in a vacuum. It’s easiest to see this information in the context of other data in your account, which is why we suggest you use the Performance Analyzer found within Adalysis or Data Studio reports to see how these metrics are interrelated. You can see how these reports are stories or get a copy of the Data Studio report here.

Targeting Changes

Average CPC is the average for an ad group, campaign, or account. The more data you aggregate, the more likely there are multiple factors at play. For instance, in this account, their CPC dropped 34%. If you look closely, their impressions dropped 85%, and their clicks dropped 75%. Right around the holidays, they paused a lot of their most expensive keywords as few people are looking for their services in December, and they are shorter on staff to fulfill requests.

If you add or remove targeting options that affect the number of clicks you receive (which is directly related to changes in impressions), then it’s likely your CPC will change when looking at a lot of data, but when you look at the places where there wasn’t a targeting change, then we need to consider other factors for why your CPC changed.

Bid Changes

The most common reason CPCs change is because you changed your bids. This occurs if you are using manual bidding and change CPCs, you add bid adjustments, or you are using automated bidding (such as Target CPA), and the system is adjusting to the data it has learned.

If you are using automated bidding based upon goals, such as Target CPA or Target ROAS, a significant change in CPCs is usually indicative of large changes to conversion rates or average order checkouts.

If you have been happy with your CPCs and overall targets for a while and you see a substantial change in CPC while using automated bidding, you should take a look at your conversion rates and conversion data to see if something has dramatically changed that is affecting the automated system.

Competitor Changes

One of the top reasons your CPCs change is due to competitors changing their bids, which affects the entire bid landscape. The easiest way to keep an eye on significant competitor changes is with the auction insight tool.

If you see that one of your competitors has a significant change in top of page rates, outranking share, and so forth, that is an indication that they have increased their ad rank. As ad rank is a combination of ad extensions, Quality Score, and bids, your competitors could have raised bids, changed their ads or organization around to increase their quality score, or improved their ad extensions.

Now, if you see that your competitors are showing less often, then you might be seeing a decrease in CPCs instead of an increase.

You can see a lot more auction insight information with our Auction Insight Data Studio Report.  This information is also useful in differentiating your PPC ads.

Quality Score Changes

Quality Scores are always in flux. If your Quality Score goes up, then your CPC will decline, or your top impression rates will increase. If your Quality Score goes down, then your CPCs might increase, or your top impression rates will fall.

That’s not always true since raising your Quality Score will increase your ad rank, and thus there’s a new competitor’s ad rank you must be beating, and the way the math works out, your CPCs could increase. These are overall trends, but there are many exceptions to any individual auction in these overall trends.

Looking at your Quality Score Trends, and watching for decreases can help keep your CPCs stable or at least enssing you do not see sudden increases due to some Quality Score issues.

Examining the Data

As we mentioned, your average CPC is a combination of all the targeting methods you are aggregating in reviewing the data. If you are trying to see why your CPCs changed, you often want to segment in one or more of these ways:

• Keyword type: brand, generic, 3rd party brands, competitors
• Funnel: top vs. middle vs. bottom of the funnel
• Targeting types: search, RLSA, remarketing, shopping, video, contextual, etc
• Device: Mobile, desktop, tablet

By looking at segments, such as brand clicks coming from non-audiences on a mobile device, it becomes easier to make sense of the trends and start to investigate why your CPCs are changing.

Wrap-up

If you are using automated goal based bidding, you should be more concerned with your goal data (CPAs, ROAS), then changes to CPCs. If your CPCs go up 25%, but your CPAs are not changing, then the system is working correctly for you.

That being said, your volume of conversions could drop with automated bidding if your competitors are active or your Quality Score drops. Thus you still want to automatically monitor your KPIs so you are alerted to any changes and can be proactive about how you are managing your account.

If you are looking across the display network, especially contextual or 3rd party targeting, it is common to see large CPC fluctuations due to how Smart Pricing works in the Google Display Network.

If you are bidding manually and your CPCs change significantly, or you are using automated bidding, and your conversion data starts to change, then examining auction insights, conversion rates, and other targeting changes related to CPC should be your first investigation step. If you need this type of quick investigation, the Performance Analyzer Data Studio template or an automated system like Adalysis can save you hours in diagnosing the changes to your account.