Alphabet Earnings: Ecommerce CPCs Deviate, Value Per Click Key

Historically, ecommerce CPCs (Cost Per Click) and Google's official figures were roughly correlated. However, during and after the pandemic, there were deviations where ecommerce CPCs differed by 7% or more on four occasions, and by as much as 14% in Q4 of 2020. In more recent quarters, the situation has normalized, with ecommerce CPCs typically within 1% to 3% of Google's guidance.

Clicks have become 43% more expensive than their cheapest rate in 2020, which was considered a bargain at the time. When compared to late 2019, the data suggests that CPCs are about 18% more expensive, which broadly matches the accumulated inflation of the past couple of years.

Focusing on value per click (VPC) is more beneficial than cost per click (CPC) because it shifts the mindset from viewing Google Ads as a cost center to a value center. This orientation encourages more productive activities such as improving on-site experience, recommendations, and the overall offer. VPC inherently includes conversion rate and average order value (AOV), which are critical for business growth and are not represented in the CPC metric.

The efficiency of ad campaigns will be determined by the ratio of value per click (VPC) to cost per click (CPC). While CPC is an important metric to monitor, it is VPC that will ultimately move the needle for a business.