Managing AdWords CPC inflation“When I was a kid, I could buy a candy bar for a nickel!”

All of us have heard something similar from our grandparents. Inflation is to blame. Inflation is when the cost of goods or services grow over time. Inflation - like death and taxes - is pretty much a sure thing.

In some part, inflation is caused by companies who constantly change and improve their products and then charge higher prices for them. The cell phone you purchased this year is “better” than the one you purchased 3 years ago, and therefore should cost more, right?

You will also notice that inflation affects the price you pay for your max CPCs over time.

If you’ve been a long term AdWords advertiser, then you’ve surely noticed this. Let’s call this AdWords CPC inflation. While AdWords is also affected by the macro economic changes, it’s also heavily influenced when competition enters the market. In a typical economy, competition can be healthy for consumer prices, but in an auction environment like AdWords, it typically results in driving the price up. Especially when a lot of companies bid only on the top spot at any cost.

In other words, new customers sign up with AdWords every day. These customers are bidding on a finite set of keywords. So the number of companies bidding on keywords will grow over time - meaning more competition and higher prices.

This also means that if you start a campaign and get your keywords dialed in but then just walk away, over time it will stop performing just because you aren’t keeping up with AdWords CPC inflation. Of course at Finch we always bid each keyword granularly, so you never overpay or underpay for a click - you stay ahead of the game.

You can’t fight economic inflation. You can complain about it and never buy another candy bar, but it’s driven by factors outside your control. Similarly, you can’t fight AdWords CPC inflation. Don’t be the guy who says “I used to buy that keyword for a nickel and now it’s a dollar!” If you want to continue to be competitive, then you need to allow your budget to grow over time.

In summary, AdWords CPCs will continue to inflate over time. Using Finch to manage your bids will counteract this so you'll always be competitive; however, you have to expect to spend more over time and adjust your AdWords budget accordingly.