Reasons For Google’s Declining Cost-Per-Click Rates

Posted Apr 15, 2012

This year Google reported some solid revenues and they even announced a dividend. The bad news is that they saw a decline in cost-per-click rates (CPCs). Google’s ad revenue is determined by the number of clicks on ads (paid clicks) and how much that advertisers pay for each click (CPC). Paid clicks has been on the rise, but CPC has been dropping. Google said the reasons for why CPCs are dropping is because of foreign exchange rates, the increase in mobile usage, faster growth in developing countries (causing lower prices), and changes in ad quality. The advertising landscape has been changing at a rapid pace with more people spending time on mobile devices, but eventually they will find a way to adapt and get better ROIs thus causing CPCs to go up again.