Rising CPCs on branded keywords? Here’s why Google’s push for PMax and AI-driven auctions are inflating costs and reducing efficiency.
Branded keywords used to be a reliable and affordable way for businesses to attract high-value customers looking for their brand. But in the past year, they have become much more expensive.
This article dives into the causes behind this dramatic increase, its impact on businesses across various sectors and strategies for navigating this new landscape.
The rising cost of branded keywords
Branded keywords have become the final frontier in Google’s quest to maximize returns on search queries.
Over the past year, the cost of branded search terms has skyrocketed, particularly in markets like legal services, where cost-per-click (CPC) rates have more than doubled compared to 2023.
Looking back further, we can see a gradual and troubling increase in what companies are paying for their own brand keywords.
The graph below illustrates data from hundreds of law firms, highlighting CPC rates for branded keywords alongside the associated cost per contact – defined in legal terms as a phone call, form fill, text or chat.
In 2018, firms were paying around $1 per click, with approximately one in five clicks converting into a contact.
Fast forward to today, and CPC rates have increased tenfold while the contact rate has dropped by roughly 40%.
Simply put, businesses now spend significantly more per click and receive far less value from those clicks.
It begs the question – what causes a price to spike on a branded search term?
The root cause: Google’s revenue-focused approach
The reality is that your brand is an auctionable keyword, and if there is anything Google hates, it’s a keyword with no competition.
When there are no competitors for your branded query, you have the opportunity to set the auction price yourself. This dynamic allows you to efficiently capture high-value customers who are drawn to your brand’s strength.
If we know anything, it’s that Google is willing to trade efficiency for more revenue when it comes to ads.
In an excerpt from the ongoing Department of Justice price manipulation case, Prof. Michael Whinston said what we were all seeing in the data in our accounts:
- “[Google is] introducing inefficiency into the auction… because it helped them extract more out of the highest – the advertiser most likely to win.”
How Google increases competition on branded terms
Your brand should not go to the highest bidder.
However, over the past year, Google has leaned into Performance Max campaigns and AI-driven solutions that encourage advertisers to hand the keys back to Google and let them steer the ship.
They have introduced local service ads into your branded queries, filling the highest position of your branded search terms with the faces of your competitors and are forcing you to bid for that position, pushing your organic listings even lower.
They have pushed broad match combined with Smart Bidding which lets you “only reach the brand traffic you want.” In reality, it just exposes your branded queries to more noise.
More and more advertisers are being shepherded into the Performance Max environment, which only allows for 1,000 account-level negatives to be added.
While a new branded exclusion tool exists, it is lacking, requires manual searches for each specific competitor and cannot handle bulk uploads.
As a result, it becomes a logistical nightmare, even in moderately sized markets.
The blurring of branded and non-branded keywords
Your brand is no longer synonymous with your brand. It is now synonymous with the line of service or work you do, and will match to those upper funnel, unbranded keywords.
We see it in our queries for all lines of legal work. Take a look at your non-branded queries and you will see your own brand matching to those keywords.
When a user searches your brand, Google will match it to a keyword like the very expensive “personal injury lawyer” – and then realize they are doing that for every one of your competitors in the market.
Predictably and deliberately, costs increase and the end user gets less relevant advertising.
Recent developments and their impact
In August 2023, Google officially announced new brand settings in Search and Performance Max campaigns.
Across our agency portfolio of personal injury attorneys, we saw the single biggest spike in branded CPC to date.
In November 2023, branded search terms took another major hit, this time on the heels of Google’s new “search themes,” designed to use AI to “ensure you have comprehensive coverage on important business themes.”
Strategies to combat rising costs
In light of Google’s deliberate brand conflation driving up costs, the only way to handle this is to deploy an age-old tactic: negative keyword lists.
Crazy, right?
At this point, we cultivate over 1,500 negative competitor keywords per client month after month, doing it the old-fashioned way.
That has been our primary strategy for bringing those costs back down, but we started to see that uptick again.
May through July 2024, we witnessed another wave of spikes in pricing. The concern is that, once again, we will hit a new ceiling and prices will never come down.
Dealing with soaring branded keyword costs
How do we fix this?
Honestly, it’s a group effort.
Creating robust negative keyword lists is only half the battle.
If your competitors – let’s refer to them as allies in this war of attrition – do not take similar actions, your efforts may fall short.
- Do not opt in for broad match branding. Keep your keywords tight and your brand in its protected lane.
- Leverage the brand exclusion tool, but do not do it at the expense of regular negative keyword hygiene.
- Do not let Performance Max drive your brand. It is too “black box” of a product to trust the AI not to chase the auction on another
competitor’sally’s brand.