CPC Decline Ends: Rising 7% In Q1 Due To Mobile & PLAs [Covario]

We may have seen the end of CPC stagnation. Covario’s Global Paid Search Spend Analysis for Q1, released today, suggests that the cost-per-click trends of the last six quarters have reversed with CPC prices rising 7% from the previous quarter and 23% year-over-year. Overall paid search spend grew 9% quarter-over-quarter and 33% year-over-year.

The following chart shows global paid search activity for Q1 ‘13:

Google CPCs Rise 39% Year-Over-Year

The study suggests that rising CPCs on Google are due in part to the growth of Product Listing Ads and the introduction of enhanced campaigns. With the roll-out of enhanced campaigns, the study’s author, Alex Funk, predicts “the consequence will be increased competition for mobile-device advertising, as well as increased CPCs across both smartphones and tablets at a higher rate than experienced in the last several quarters.”

The table below shows the recent trends in global CPCs for the major platforms.

Mobile Growth & Cost Increases Continues

The report finds that globally, mobile advertising grew 51% in Q1 versus the previous quarter and 124% year-over-year. The device breakdown of mobile ad spend was 36% for smartphones and 64% for tablets, a nearly identical split to what was reported in Q4’12.

CPCs on smartphones remained at a 52% discount to desktop, but they have been trending up over the past year. Tablet CPCs have closed the gap with desktop CPCs are are now actually more competitive in some industries. CPCs on tablets have risen each of the last six quarters and were 6% higher than desktop CPCs in Q1.

A New PPC Landscape

The study concludes that increased investment in paid search and better performing ad creative (namely PLAs) in conjunction with rising CPCs “shows a changing landscape where increased competition, tablet growth and popular ad formats like Google’s Product Listing Ads have reversed the trend of limited CPC growth.”

The complete report is available for download.