Why Is There a Decline in Search Advertising Conversion Rates?
This year, the search advertising landscape is more challenging for industries and companies.
- Companies use various channels to run their ad campaigns; one popular method is search advertising.
- So, how do they know if their search ads are optimized to their maximum potential? One way to know is to stay updated about search advertising benchmarks.
- WordStream recently conducted a study and came out with a few benchmarks for various industries.
Companies use various digital channels to run marketing and advertising campaigns, such as social media, search engines, and influencer marketing. One time-tested method they use to promote their business is search advertising, alternatively called pay-per-click (PPC). And if done correctly, it can generate an average of 200% ROI, according to Google.
But how can companies know that their search ads are optimized to their maximum potential and are performing well? One efficient way to do this is to stay updated about the search advertising benchmarks.
WordStream recently analyzed search advertisements across companies, industries, and search engines (primarily Google and Microsoft) to develop a few benchmarks. Here are a few insights from the study and tips to improve your campaign’s performance.
See more: 5 Best Practices To Elevate Your Product Content Across Search Engines
CTR Increased While Conversion Rates Declined for Most Industries
The following are a few major trends regarding the standard metrics of search advertising.
The click-through rate (CTR) increased year-on-year (y-o-y) for almost all industries. Only two industries – Business Services and Industrial and Commercial – saw a small decline in CTR. Regarding cost per click (CPC), 61% of industries witnessed a rise, while only 35% witnessed a decline. This may be possible as CPC increased throughout 2022, according to WordStream’s earlier data. Regarding conversion rate (CVR), 91% of industries saw a y-o-y decrease. Finally, the cost per lead (CPL) increased for 91% of the industries. Automotive sales and Beauty and Personal Care were two exceptions.
The key takeaway from the above trends is that the search advertising landscape presents more challenges to industries and companies this year.
The Average CTR Is 6.11%
CTR is a metric that can reveal much about your search advertising campaign’s effectiveness. A higher rank combined with an attractive ad copy may entice more people, possibly leading to more clicks.
The study found that the average CTR in Google Ads this year is 6.11%. The industries with the highest CTRs were Arts and Entertainment (11.78%), Sports and Recreation (10.53%), and Travel (10.03%). The industries with the lowest CTRs were Attorneys and Legal Services (4.76%), Home and Home Improvement (4.8%), and Business Services (5.11%).
The industries seeing the biggest decline in average CTR y-o-y were Business Services and Industrial and Commercial.
If your CTR is below your industry average, you can improve it by relooking your ad targeting and copy. For instance, you can use emotional phrases or power words in your ad copy. Similarly, you can also reconsider the audience you are targeting.
The Average CPC Is $4.22
Clicks are critical for a search campaign since companies want ad viewers to click on the landing page to convert them into customers. The average CPC is helpful when determining the bidding strategy, budget, ad copy, and more.
According to the study, the average CPC for Google Ads is $4.22 this year. The industries with the highest CPC were Attorneys and Legal Services, Dentists and Dental Services, and Home and Home Improvement. The industries with the lowest CPC were Arts and Entertainment and Real Estate (both at $1.55). Travel was close behind ($1.63).
More industries witnessed a rise in CPC in 2023 (61%) than in 2022 (57%). The biggest increases y-o-y were in Personal Services, Furniture, and Real Estate. Some other industries saved on CPC compared to last year. They were Finance and Insurance, Auto Sales, and Dentists and Dental Services.
There are many ways to lower your CPC; for example, you can look at your Quality Score. You can also re-assess your bidding strategy. Some strategies make you pay less or more depending on the goal you optimize for.
The Average CPL Is $53.52
CPL is considered the money metric by many advertisers, as it gives an idea of the PPC ad’s worth. According to the study, the average CPL for Google Ads this year is $53.52. The industries with the highest CPC were Career and Employment, Attorneys and Legal Services, and Furniture. The ones with the lowest CPL were Automotive Repair, Services and Parts, Collectibles, Gifts and Shopping, and Animals and Pets.
The biggest increases y-o-y were in Career and Employment, Real Estate, and Arts and Entertainment. Auto Sales had the biggest decrease y-o-y, followed by Beauty and Personal Care.
To lower your CPL, focus on reducing your CPC, as it directly impacts how much a conversion may cost you. Your conversion tracking strategy is another component of CPL. The more actions your website offers your visitors to complete, the more conversions you will likely have that can offset your lead costs.
While CPL is a valuable metric, it isn’t the most critical one that helps you measure your campaign’s effectiveness. If the quality of leads is high, then a high CPL may be ignored.
What These Benchmarks and Trends Mean for Companies
There are four key takeaways for businesses from these numbers.
1. Keep flexible budgets to compete
With inflation and the rising average CPC and CPL, it will be more challenging for advertisers to stretch their search ad budgets. While continuously increasing budgets for search ad campaigns may not be feasible, advertisers can be savvy when budgeting.
Budget flexibility can help in CPC and CPL success. You can stay competitive if you are ready to reallocate the PPC campaign’s budget on the basis of your unique requirements and market trends. Consider leveraging a spend-tracking platform to keep your budget strategy agile.
2. Customers’ search journey is changing rapidly
Given that the average CVR declined for 91% of industries, we can assume that the buyer’s journey is evolving. Consumers are putting more thought into their buying decisions owing to various factors. Further, today’s digital landscape enables consumers to interact with a brand using multiple channels before converting. Search advertising may be working at the top of the funnel, but other strategies may contribute more toward converting leads.
One tip for brands is to incorporate search advertising as part of a multi-channel strategy instead of solely relying on it. Advertisers should also understand the changing customer behavior and alter their search ads strategy accordingly.
3. Novel additions to search campaigns are leading to highly clickable ads
CTRs have increased for most industries implying that users are more inclined to click on advertisements. Platform updates like responsive search ads being the default ad type and the availability of additional ad assets have increased the ads’ quality on SERP. Further, how well these ads blend into organic results on the search engine’s interface may be making ads more enticing to click. New ad formats may be further impacting CTR.
Hence, optimize your ad copy and leverage multiple ad assets to enhance your advertisement and keep up with the competition.
See more: Marketing Beyond Paid Search: 5 Ways To Create A More Holistic Strategy
4. Tracking and reporting are critical
Tools that track, measure, and report your ad’s performance are crucial to your success. Staying on top of these benchmarks is vital to understanding key industry trends. Simultaneously, benchmarking your own progress to assess your performance against competitors is also critical.
Further, focus on structuring the campaigns around your goals and objectives. Look at the metrics most aligned with your search campaign goals and structure your account to optimize those metrics’ performance.
Unlock the Potential of Your PPC Campaign
Every business is unique, and you can have your own strategy to promote your brand or business on search engines. Nonetheless, the benchmarks covered here are helpful guiding points to maximize your PPC campaign’s ROI. And you can unlock the true potential of your PPC campaigns by following the tips above.
What steps have you taken to improve the effectiveness of your search campaigns? Share with us on LinkedIn, Twitter, or Facebook. We’d love to hear from you!
Image source: Shutterstock
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