The Latest Google Changes & What They Mean for CPCs

As PPC advertisers, it’s our job to stay on the ball, and more importantly, stay ahead of any changes Google implements to AdWords structures and programs that may impact our clients. As Google continues to work towards a more efficient advertising ecosystem for marketers, as well as one that provides the most relevant experience to consumers, it’s no surprise that these changes come up fairly often, and quickly! While the exact impact always varies across different brands, we like to break down the nuances of any and all Google changes that may influence budgeting or paid search strategy in general, so that we can continually monitor our clients’ competitive position.

Exact Match Keyword Changes – Close Variants

Back in March of this year, Google announced a change to exact match keywords that ultimately expanded the definition of “exact” to encompass variants of keywords in advertisers’ accounts so that the right ads were served for qualified searches. Google’s intent was to allow brands to capture more traffic, while simultaneously allowing users to have a better, more relevant experience based on the intent of their searches. For a brief refresh on how exactly close variants changed, check out our blog from March. Google explained in their AdWords blog:

“With this expansion of close variants, you’ll (advertisers) no longer have to build and maintain lists of reworded and reordered exact match keywords to get the coverage you want.”

Google also recommended advertisers leverage RLSA, Smart Bidding and negative keywords to help compensate for the change, to shape search traffic and to help reduce costs. Based on the initial insight from Google, we anticipated that some of our clients may see increases in CPCs due to close variant CPCs generally being significantly higher than exact match keywords. We also mentioned that on the flip side, advertisers who already operate a robust phrase/broad match program may see traffic shift from these match types towards exact match. In this case, we hypothesized that topline CPCs might decrease, given the much lower costs we see associated with exact match keywords.

Back in April, close variants were live on only about 5% of all Google traffic, which steadily increased to 50% by mid-May, 85% by May 25th, and now at nearly 100% of all traffic. Because we are just now at 95-100%, we expect to glean some interesting insights about how these changes have, and continue to impact client conversion rates, clicks and CPCs over the next few months. While we’ve honed in on exact match and close variant performance over the recent year, we have also kept in mind a variety of other Google changes that have likely played a role in overall account performance trends.

A YOY Outlook: Exact Match vs. Close Variant

By the very nature of close variant (more variations of searches matching to keywords), we recognize that a loss of relevance could potentially come into play, which could in turn impact conversions. For the accounts that did experience decreases in CVRs over the past year, it ranged from as little as .9% to 25% – keeping in mind the many other factors that ultimately influence conversion. From the other end of the spectrum, we did see conversions increase on other accounts, possibly due to more ads triggered for the different variations of high-intent searches (that may not have appeared before).

Where we, and the industry at large, have been most interested is in the impact to costs. On a handful of accounts, we have seen CPCs for close variants much higher than traditional exact match, which in turn drives costs up. In other scenarios, we saw CPCs lower on close variants, but with costs still up due to a heavy negative keyword strategy. It will be critical to keep an eye on accounts over the coming months, as the gap closes on close variant and traditional exact match keywords get phased out completely.

Changes to Ad Rank Thresholds – Bids Hold More Weight

Since May, Google has also been rolling out, fairly rapidly, changes to Ad Rank thresholds. Ginny Marvin first covered these changes in Search Engine Land back in mid-May. She mentioned:

“Some advertisers have reported seeing shifts in AdWords CPCs since then — some minimal, some significant.”

Both elements of these changes, now fully rolled out, were interesting to us. But what will likely impact our clients the most is the idea that bids may be weighted more heavily (i.e. they’ll be more important) in the Ad Rank calculation, depending upon query meaning. This would seem to place less emphasis on the actual ad quality, and place more on the amount of the bid; and ultimately, this could cause actual CPCs to hit bids, increasing overall costs for client accounts.

In the article, Marvin references the reality that even keywords with high Quality Scores may have higher CPCs, driving increased competition for inventory on the SERP. This type of scenario could lead to drops in traffic and revenue if brands don’t have the necessary budget to bid competitively. In our initial analysis, we did see CPCs increase dramatically for some accounts across mobile and desktop, sometimes by as much as 300%. Others have not yet been impacted.

Any and all changes that Google makes are often in alignment with their vision to make advertising better for consumers. By factoring in bids, this may increase competition for the top inventory, and may naturally drive some competitors out of the space. We will be intrigued to see how Quality Scores continue contributing to the way ads rank in the SERP, particularly being that the quality and the relevance of the ad is what makes it valuable to the consumer. We are continuing to monitor our clients’ bids very closely to see how this change shakes out over the next several weeks and months.

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  • Navin Rai

    Hi Sarah,
    Nice Blog. It`s that Google constantly changing their ads alignment with new strategies, which can bring more competition. Thanks for sharing such nice blog.!

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