Rising advertiser competition and AI search summaries drive double-digit CPC inflation
Increased advertiser competition and the rise of AI search summaries are driving double-digit cost-per-click inflation, prompting brands to shift strategies toward alternative channels.
1. Rising Costs in Paid Search
Paid search costs are increasing across nearly all categories, with cross-industry average cost-per-click (CPC) rates more than doubling over the last decade. Recent data indicates year-over-year CPC inflation ranging from 14% to 22% on platforms like Google and LinkedIn, with some accounts experiencing increases as high as 25%. This trend is driven by a combination of factors, including a 35% rise in the number of advertisers participating in auctions and a reduction in organic search traffic. As AI Overviews increasingly provide direct answers to user queries, organic click volume has declined, forcing more competition into a smaller pool of commercial search auctions.
2. Factors Influencing Performance
Performance in paid search is now determined by three distinct layers: brand, reach, and post-click experience. The auction itself, which is where most teams focus their efforts, currently offers the least opportunity for improvement. The "brand" layer, which exists upstream of the auction, is critical because it determines whether a click is generated or absorbed by AI summaries before a bid is even placed. The "reach" layer involves traditional bidding and ad strategies, though its effectiveness is limited by the shrinking pool of available clicks. Finally, the "experience" layerâwhat happens after the clickâis the only area fully controlled by the advertiser. Improving landing page quality and conversion strategies can help offset rising costs by increasing the value of each click.
3. Strategic Shifts for Advertisers
To maintain margins in an inflating market, experts suggest that advertisers should look beyond traditional, highly competitive search auctions. Shifting budgets toward "blue ocean" channelsâsuch as Microsoft Advertising, LinkedIn Thought Leader Ads, Reddit, or podcast and connected TV advertisingâcan provide access to high-intent audiences with less competition. Furthermore, successful brands are increasingly integrating their media, landing page, and content strategies into a unified approach.