Google advertisers have witnessed a steady climb in cost-per-click (CPC) in recent years. Across the board, search advertising is becoming more expensive.
In 2024, 86% of industries saw higher CPCs compared to the previous year, with an average jump of about 10% year-over-year.
The average CPC reached £3.40 (up from £3.08 the year before) and evidence from a U.S. antitrust trial confirmed that Google Ads prices have consistently increased over the years.
This post explores the reasons behind the rise in CPCs and how this plays out across different sectors.
The Rising Cost of Google Ads
After a period of relatively modest growth, the past year brought an accelerated increase in costs.
A recent analysis found over half of industries had CPC growth faster than the ~4% consumer inflation rate, with a lot of advertisers left wondering why.
Several factors are at play, from market competition to economic conditions and even changes in how Google’s ad auctions operate. Something I know firsthand from running a Google Ads management agency with scope across many different accounts.
Below, we break down the primary reasons why Google Ads CPCs are increasing.
Key Factors Behind Rising CPCs
More Advertisers and Competition
One key reason for rising CPCs is increased competition in search advertising.
The pandemic in 2020 accelerated the shift to online commerce with global e-commerce rising 34 percent in 2020, jumping ahead almost five years vs forecasting.
Brands were forced to adapt, and those that were already ahead saw record breaking growth and doubled down on PPC, which can be seen with Google’s ad revenue rising 42.6% YoY from 2020 (£109.8bn) to 2021 (£153.6bn).
Paid search spending has been growing year over year since, with search ad spend jumping around 11% in 2023 to £98.4 billion.
More advertising dollars (and more advertisers) are chasing the same audiences and driving up CPCs as more brands compete for the same auctions, and the impact of this is vastly different across verticals.
Take retail for example, this competitive pressure is pronounced with the typical retail brand’s average search CPC rising by an estimated 40–50% over the past five years.
In a relatively short time, brands maintaining steady paid media budgets may be generating up to 50% less traffic for the same investment.
Economic Inflation And Higher Budgets
Another driver is economic inflation and the overall rise in marketing costs.
In recent years, inflation has affected virtually every business expense, digital advertising included.
According to a Google data lead, “The rise in CPC across most industries aligns directly with the ongoing economic challenges like inflation.”
In other words, as the cost of goods and services climbs, so do advertising costs and data from industry benchmarks back this up with the Wordstream Google Ads benchmark showing a ~10% increase in CPC from 2023 to 2024, largely attributed to lingering effects of inflation.
Even though general inflation rates have started to cool off, prices haven’t actually fallen and ad costs are no exception.
Advertisers in 2025 are paying more per click partly because £1 in ad spend simply doesn’t go as far as it did a couple of years ago and higher bids are needed to maintain visibility, especially as companies raise their marketing spend to keep pace with rising costs in other areas.
Declining Ad Click Volume (Lower Supply)
It’s not just about demand, the supply of clicks has been under pressure too.
There are signs that people are clicking on fewer search ads than before, which effectively reduces the available inventory of clicks.
For instance, late in 2023, paid search ad impressions dropped by about 15% year-over-year even as ad spend rose 4%.
Where is this coming from?
Industry analysts point to changes in user behavior and search platforms.
The rise of rich search results and answers (like Google’s generative AI results) can satisfy users’ queries without additional clicks.
The Google Ads system faces classic supply and demand pressure: when ad supply (clicks) tightens and demand (advertiser spend) keeps growing, CPC prices are forced upward.
You might be thinking “why would Google want to reduce clicks”, well, with rising revenue year over year and click costs increasing, it’s a pretty good picture for Google whilst they roll out AI snippets, AI mode, etc.
Auction Dynamics and Platform Changes
Google’s advertising marketplace isn’t a static environment, changes in auction dynamics and platform policies can and will influence CPCs for advertisers.
Google’s move toward automated bidding strategies and fully automated solutions such as PMax controls bids under the premise of working towards the advertisers’ conversion goals.
When machine learning optimises for performance, it may be willing to pay more per click if it predicts a conversion, thereby lifting the average CPC across many auctions.
There’s also evidence that Google itself has leverage over pricing in the ad auctions.
Internal documents revealed during the recent U.S. Department of Justice trial showed Google executives discussing ways to “raise…prices” by 10% to 15% by tweaking auction parameters.
While Google frames many auction changes as quality improvements, these adjustments can result in higher costs for advertisers.
In short, the platform’s evolving auction algorithms and rules (whether for revenue targets or new campaign formats) have typically pushed CPCs higher over time whilst removing visibility for advertisers on exactly why they paid more for click A vs click B..
CPC Trends Across Key Industries
Rising CPCs have been felt across virtually all sectors, but some industries are seeing especially dramatic increases (while a few have seen relief). Here are a few notable examples from 2023–2024 data:
- Property: CPCs surged by ~35.5% year-over-year, the largest jump of any sector. Despite higher interest rates cooling the housing market, competition remained fierce, driving up click costs.
- Retail & Shopping: Retail and e-commerce advertisers faced roughly a 20% increase in CPCs on average (comparing Q1 2024 to Q1 2023), with many looking to external support from a Google Shopping agency to help optimise feeds, maintain efficiency, and manage rising costs.
- Finance & Insurance: Not every industry saw an increase, CPCs in finance actually dropped ~25% in the past year. With high interest rates and economic uncertainty, banks and insurers pulled back, reducing competition (and costs).
- Legal Services: The legal sector continues to command some of the highest CPCs (around £5.53 – £7.11 per click) on Google, fortunately for advertisers, costs eased by about 3% year-over-year in this category.
There’s nuances between industries and verticals, but overall, the cost to advertise on Google is trending up across most markets.
So, What Can Advertisers Do About This?
For advertisers, the reality of increasing CPCs means it’s more important than ever to be strategic and maximising the value of each click is crucial.
This starts with closely monitoring account performance, the changes you are making and most of all, tracking your CPC trends over time across key segments to understand where the increases (or decreases, on very rare occasions) are coming from.
Keep an eye on external factors, recognise that some CPC growth is driven by macro trends like inflation and industry cycles, things outside any single advertiser’s control, whereas others, such as Google admitting to raising click costs are very much out of our control.
Analyse performance metrics (cost per lead, conversion rates, ROI) in tandem with CPC so you can make informed decisions about bidding and budgeting.
Stay agile where possible and think outside of the accounts, if your data is fully connected and you have a holistic view of performance outside of the short term KPIs (e.g. ROAS, CPL, etc), you might be looking at a different picture that could help navigate the changing landscape.
