Your ads get more expensive when more advertisers compete for the same people, or when your ad becomes less relevant to the people who see it. Every impression and click is priced in an auction, so the price moves with competition even when your ads and budget stay the same. Competition is highest once rising demand is obvious to everyone.
How do ad auctions set the price you pay?
Ad auctions set the price by comparing every eligible ad each time there is a chance to show one, and the price depends on how strongly the other ads compete. Neither Google nor Meta sells ad space at a fixed rate.
On Google Ads, where your ad appears depends on Ad Rank. Google lists the factors as your bid, the quality of your ad and landing page, the expected effect of ad assets, Ad Rank thresholds, the context of the search (including the search terms, device, location and time of search) and how close competing ads are in rank. Your actual cost per click is the minimum needed to clear the Ad Rank thresholds and beat the Ad Rank of the competitor immediately below you. If no competitor meets the threshold, you pay the reserve price.
On Meta, an auction runs each time there is an opportunity to show someone an ad. The winner is the ad with the highest total value, which combines three factors:
- The bid, or what the advertiser is willing to pay for the result.
- Estimated action rates, Meta's estimate of whether this person will engage with or convert from this ad.
- Ad quality, based on feedback from people who see or hide the ad and on checks for low-quality traits such as engagement bait.
Because relevance counts, a more relevant ad can win against ads with higher bids.
Why is my CPM rising?
CPM is cost per thousand impressions, what you pay for your ad to be shown 1,000 times. Your CPM rises when more advertisers want the same audience, when your audience is small, or when people respond less to your ad.
More competition is the most common cause. A person can fall into many advertisers' target audiences at once, and every advertiser targeting that person competes in the same auction. When more of them bid, each impression costs more.
A narrow audience makes it worse, because the system has fewer people to choose from and has to win auctions for each one. A tired ad adds to it: when fewer people engage, Meta's estimated action rates fall, and you need a higher bid to win the same auctions.
Why is my cost per click increasing on Google Ads?
Cost per click on Google Ads increases when the competitor just below you improves their Ad Rank, because your price is set by what it takes to beat them. They might raise their bid, improve their ad or add assets. Any of those raises what you pay for the same position.
It also increases when your own quality slips. If your ad or landing page becomes less relevant to the searches you appear on, you need a higher bid to hold the same Ad Rank. Check your search terms. Broad keywords that start matching loosely related searches can pull in clicks that cost as much and convert less.
Why do ad costs rise when demand for a product is obvious?
Ad costs rise when demand is obvious because every advertiser selling into that demand sees the same signs at once and bids for the same buyers. The auction then prices in the crowd.
Say home sales have climbed for several months and new owners are replacing doorbells and locks. Early in the build-up, a few sellers notice. By the time sales of doorbells are up for everyone, every brand has seen it in its own numbers and raised budgets. The buyers are the same people, and now more ads compete for each of them.
The same happens with business software. When hiring rises month over month, companies shop for onboarding software. Once that shows up in every vendor's results, cost per click on onboarding searches rises with it.
You pay the most when you arrive with the crowd. The days when demand starts building are often cheaper, because fewer advertisers have reacted yet.
Why did my cost per result jump right after I raised my budget during a busy week?
Your cost per result can jump after a budget increase in a busy week for two reasons at once. Meta says a large budget change can send an ad set back into the learning phase, when performance is less stable and cost per result can be higher. And a bigger budget has to win more auctions in a week when competition is already high, so it buys pricier impressions.
Is a higher CPM always bad?
A higher CPM is not always bad, because what matters is the cost of each sale. If more of the people who see your ad buy, cost per result can hold steady while CPM rises.
Say your CPM goes from $10 to $14, and 1 in 1,000 people who see the ad bought before while 2 in 1,000 buy now. Your cost per sale falls from $10 to $7. Judge cost per result and ROAS against your break-even point, which break-even ROAS shows how to work out. If ROAS is falling too, why is ROAS dropping walks through the causes.
How do the ways to respond to rising ad costs compare?
The ways to respond to rising ad costs differ in whether they fight the crowd or avoid it. Only moving spend earlier avoids paying the crowd's price.
| Approach | What it answers | What it misses |
|---|---|---|
| Raise bids to keep up | How to hold your share in a busy auction | Pays the highest prices of the stretch |
| Cut spend until costs fall | How to stop overpaying this week | Misses the buyers who are ready now |
| Improve relevance and creative | How to win more auctions at the same bid | Competition that grows no matter how good the ad is |
| Start spend as demand begins building | How to reach buyers before other advertisers react | Costs caused by weak ads or broken tracking |
How do you buy attention before the crowd arrives?
You buy attention before the crowd arrives by watching the build-up behind your product's demand and starting spend when it begins, before your own results confirm it. A demand window is a stretch of days or weeks, with a start and a stop, when demand for a product rises. What is a demand window explains how they form.
Work from the reason people buy. If your buyers are families adopting pets, watch whether pet adoptions have climbed for several months, since new owners shop for crates and pet insurance in their first weeks. If your buyers are new businesses, watch new business filings, since founders need accounting software before the first invoice. Verdius does this watching for you and alerts you when a window for your product opens.
Then step spend up as the build-up climbs, and step it down when it levels off. When to increase ad spend covers the steps. Verdius is software that predicts when demand for a product will rise and who to target then, so you can start before the crowd does.
What can you control when ad costs rise?
You control how relevant your ads are, how broad your audience is and when you spend. You do not control how many other advertisers enter the auction.
- Refresh creative when engagement falls, since relevance feeds both Google's Ad Rank and Meta's total value.
- Keep audiences broad enough that the platform can find cheaper impressions.
- Improve the landing page, which counts toward Ad Rank on Google.
- Prune search terms that match loosely and convert poorly.
- Move spend toward the start of demand windows, when fewer advertisers compete.
- Set a bid limit or a cost per result goal if you would rather deliver less than pay above a set price.
Verdius handles the timing item on that list: it finds when each window for your product starts and stops, so you know when to move spend earlier.
Should I raise my bids when competitors push cost per click up in a busy week?
Raise bids in a busy week only if your ROAS at the higher cost stays above break-even. If it does not, hold your bid and accept less volume, then start earlier the next time demand for your product begins to build.
How does Verdius help when ad costs keep rising?
Verdius is software that predicts when demand for a product will rise and who to target then. Of the things you control when ad costs rise, it helps with when you spend.
For each product, you get:
- Optimal windows to run ads, each with a start and a stop, ranked against each other.
- The events behind each window, such as hiring rising month over month so companies shop for onboarding software.
- The audience to reach, by age, income, location and interests, in the terms ad platforms already use.
- An alert when a window opens and when it closes.
Verdius reads your Google Ads, Meta and other ad accounts, plus Google Analytics and Search Console. It never changes your bids or budgets; you decide what to spend. See how Verdius finds windows.