Google Ads’ cost per lead is going up and conversion rates are falling

The news: The cost per lead for Google Ads has gone up in 91% of sectors year over year, according to Wordstream’s industry benchmarks report.

• Conversion rates fell in 21 of 23 of industries, with a typical overall decline of 14%—a greater decline than last year's, but relatively in line with 2019’s 12% decline.

Up, up, and away: The price of each lead has gone up drastically. Cost per lead increased in 21 of 23 industries, with an average total increase of 19%. While this is comparable to 2019's increase of 21%, it is substantially greater than the 5% rise and 4% drop that occurred in 2021 and 2020, respectively.

Some of the largest CPL increases were in the following sectors:

• Arts/entertainment (+134%)
• Travel (+69%)
• Furniture (+54%)

The only two sectors with CPLs going down were education/instruction (-29%) and finance/insurance (-2%).

Our take: As with many other things these days, inflation is driving changes in the advertising sector. Consider the following:

• DraftKings’ recent earnings reinforced that company’s high customer acquisition costs (CAC), causing its stock to crater.
• Some direct-to-consumer (D2C) natives have even taken to retail expansion to protect themselves against rising customer acquisition costs, while others are leaning into wholesale.
• Players like Poshmark have even been acquired after struggling with CAC while others, including Outdoor Voices, are still on the market for the very same reasons.

With Google having had a weak Q3 in part on account of its ad business, this doesn’t bode well for its Q4 results—and its search ad revenue growth will be nearly half of what it mustered this year.

This article originally appeared in Insider Intelligence's Marketing & Advertising Briefing—a daily recap of top stories reshaping the advertising industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.

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