Why Are Google Ads CPCs Increasing?

Advertisers using Google Ads have seen their Cost Per Click (CPC) steadily rise in recent years. Across almost all industries, search advertising is becoming increasingly expensive.

In 2024 alone, 86% of industries saw higher CPCs compared to the previous year, with an average rise of around 10% year-on-year. The average CPC reached £3.40 (up from £3.08 the year before), and recent evidence from a U.S. antitrust trial confirmed that Google Ads pricing has consistently increased over time.

So why exactly are Google Ads CPCs increasing, and how does this impact different sectors?

Here’s the breakdown.

What’s Behind Rising Google Ads CPCs?

After a period of relatively stable growth, the past 12 months brought accelerated cost increases. According to Wordstream’s Google Ads benchmark, over half of all industries saw CPC increases higher than the UK’s consumer inflation rate of approximately 4%.

Several interconnected factors drive this trend: heightened competition, economic inflation, declining ad clicks, and changes in Google’s ad auctions. Having managed numerous Google Ads accounts across various sectors, we’ve witnessed these factors first-hand.

Here’s a closer look at each:

1. Increased Competition from More Advertisers

One key reason for rising CPCs is intensified competition within search advertising.

The pandemic significantly accelerated online commerce. Global e-commerce jumped 34% in 2020, advancing the industry by almost five years, according to McKinsey & Company.

Brands pivoted rapidly, investing heavily in PPC. Google’s advertising revenue surged as a result, increasing 42.6% year-on-year from £109.8bn (2020) to £153.6bn (2021). Search ad spend has continued climbing, growing around 11% to reach £98.4 billion in 2023.

With more advertisers competing for limited search inventory, CPCs naturally rise. Retail, for example, faced particularly intense competition, seeing average CPC increases of approximately 40–50% over the past five years. The result? Many advertisers now achieve significantly fewer clicks for the same budget.

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2. Economic Inflation and Bigger Budgets

Another significant factor behind rising CPCs is economic inflation, which has impacted almost every business expense—including digital advertising.

According to a Google data lead quoted by Marketing Week, “The rise in CPC across most industries aligns directly with ongoing economic challenges such as inflation.”

Data backs this up. The Wordstream benchmark highlighted a roughly 10% CPC increase from 2023 to 2024, largely driven by inflationary pressures.

Although inflation rates have somewhat stabilised, costs remain elevated. Businesses are spending more just to maintain the same level of visibility, pushing CPCs upward as competition grows.

3. Declining Ad Click Volume (Reduced Supply)

It’s not just demand driving CPCs up. Supply—the number of available clicks—has also shrunk.

Late 2023 data shows paid search ad impressions declined by around 15% year-on-year, even as ad spend increased by 4%.

Why fewer clicks? User behaviour is evolving. Google’s introduction of richer search features, particularly generative AI results and instant answer snippets, means users don’t always need to click ads or organic results. According to industry analysts, fewer clicks result in higher CPCs as competition for those remaining clicks intensifies.

This dynamic creates a clear benefit for Google: lower click volume paired with rising costs per click means consistent revenue growth.

4. Auction Dynamics and Google’s Platform Changes

Google’s ad auction isn’t static. Changes in auction dynamics, automation, and platform policies consistently push CPCs upward.

Automated bidding systems, such as Performance Max (PMax), use machine learning to predict conversions. While this helps maximise conversions, it also frequently bids higher, raising overall CPC levels.

Further, internal Google documents revealed during the recent U.S. antitrust trial confirmed the company actively considered ways to “raise prices by 10% to 15%” by altering auction parameters.

Although Google presents many algorithmic adjustments as quality enhancements, these changes typically push CPCs higher, reducing transparency for advertisers about exact cost drivers.

How CPC Trends Differ by Industry

Rising CPCs impact sectors differently. Here are a few notable changes from 2023–2024 data:

Property: CPCs increased by around 35.5% year-on-year, despite higher interest rates slowing property markets. Strong competition kept costs rising.
Retail & Shopping: E-commerce brands saw approximately a 20% CPC increase. Many now seek external support, such as dedicated Google Shopping specialists, to manage efficiency.
Finance & Insurance: CPCs decreased by around 25% as economic uncertainty led many advertisers to pull back spend.
Legal Services: Legal still commands some of the highest CPCs (£5.53–£7.11), although costs eased slightly by around 3%.

Across most markets, however, Google Ads remain an increasingly costly channel.

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What Can Advertisers Do to Mitigate Rising CPCs?

Increasing CPCs make efficiency and strategic clarity more important than ever. Advertisers should:

Closely monitor CPC trends: Understand exactly where cost increases originate and act accordingly.
Factor in external conditions: Acknowledge macroeconomic forces like inflation, industry cycles, or Google’s strategic decisions—recognise what’s controllable and what isn’t.
Measure beyond basic KPIs: Track metrics like Cost Per Lead, Conversion Rates, and ROI alongside CPCs, enabling informed bidding and budget decisions.
Think holistically: A connected view of your overall marketing performance—beyond just short-term ROAS or CPL—can reveal different strategies for navigating CPC inflation.

For brands feeling the pressure of rising CPCs, strategic media planning and agile optimisation become crucial.

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Final Thoughts

The reality of increasing Google Ads CPCs isn’t going away. Competition, inflation, changing user behaviours and Google’s platform dynamics all play a role.

For advertisers, success means being proactive, strategically focused, and adapting quickly. Your media agency partner needs to understand these forces, know how to optimise around them, and help you navigate a more challenging landscape.

At Media Performance, that’s exactly what we do. If you’d like a fresh perspective on your media strategy or to discuss your current CPC challenges, get in touch and see how we work.

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