CPCs for Google Shopping ads have increased 53% year-on-year: report

The cost per click (CPC) of Google's Product Listing Ads (PLAs) has increased by 53% year-on-year, reaching an all time high in June as the search engine finally completed the transition of shopping results to a commercial model.

Though PLAs are still cheaper than standard text paid search ads, it shows that Google has successfully managed to cause a massive increase in CPCs by changing how the ad formats work.

In fact, PLA CPCs have increased by 34% since January alone and costs are likely to continue rising despite a slight drop off in July, which is likely as a result of seasonality.

The research, which comes courtesy of Marin Software, is based on analysis of search marketers that spend more than $100,000 per month on paid search and as such may not reflect performance trends for small retailers.

The data also shows that shoppers continue to find PLAs more attractive than standard text ads, as evidenced by the fact that PLA clickthrough rates (CTR) have remained higher than standard text ads since November 2012.

They were a record 21% higher in June and July 2013, and had also increased 19% year-on-year.

This is likely caused by more optimised product feeds, coupled with mobile targeting and increased familiarity of PLAs among shoppers, which has gradually created a more engaging shopping experience.

To make the most of the opportunity presented by PLAs, Marin has published four strategies...

1. Granular product targets

Product targets, created within Google's Merchant Centre, enable retailers to deliver PLAs based on product ID or SKU.

In general, the more granular the product target, the more likely a relevant ad will be delivered for a corresponding product search. Instead of grouping multiple products together into a single product target, search marketers who map product IDs or SKUs to individual product targets are able to tie the performance of each target directly back to the individual product.

Optimising with this level of visibility and control allows retailers to not only align product targets with product-specific business goals, but also calculate optimal bids that maximise revenue across the entire product inventory.

2. Grouping for promotional text

Promotional text, which is set at the ad group level, also benefits from granularity and is best utilised with a tightly themed set of product targets.

Retailers can significantly differentiate their PLAs from their competitors by organising product targets that are consistently promoted together into separate ad groups or the same ad group, such as by brand or product category.

However it's important to note that promotional text applies to all the products targeted in a specific ad group, therefore the messaging should be applicable to all relevant products and should be updated regularly to reflect changes to promotional offers.

3. Top performing products

Similar to paid search keywords, prioritising top performing product targets allows retailers more control over their revenue outcomes.

By increasing exposure for these products search marketers can bring in more revenue while investing less time in management and optimisation.

For example, increasing product target bids or testing new images for popular products are two common strategies for increasing visibility among shoppers.

4. Poor performing products

Products with low margins or that perform poorly with standard text ads might also perform poorly with PLAs.

By excluding these products or setting product filters to define which items can appear for PLAs, retailers can avoid bidding on these unprofitable products and wasting their campaign budgets.