Many businesses make one fundamental mistake in their Google Ads campaigns. They mistakenly assume that a lower Cost-Per-Click (CPC) always leads to better overall performance. It's an understandable misconception, as it seems logical to get more clicks from the same advertising budget.
However, if you're too fixated on lowering your CPC, you may inadvertently reduce the quality of your traffic, negatively impacting your conversion rates, lead quality and bottom line.
Sometimes, trying to get cheap clicks can cost you more in the long run.
Cheap clicks are not always valuable clicks
A Google Ad click is essentially part of an auction, and auctions are not simply cheaper just because someone decided that the ad should be displayed at a lower cost.
Every click is valued on its likelihood of actually converting to a desired outcome, which means that consistent low CPC may be indicative of lower traffic quality.
Often, the reason your ad click has a low price is that either your competitors don't see that traffic as having much value, your search terms may have weaker or less commercial search intent, users are only in the research stage, or the probability of the click converting into a sale or lead is inherently lower.
For example, someone searching for 'what is the best CRM software' may yield a much lower CPC because they are likely earlier in the customer journey, compared to a user searching 'buy CRM software today' or 'CRM demo pricing', where conversion is imminent, increasing competition and thus the cost-per-click.
The second example click is more expensive but is much more likely to be profitable.
This is the issue advertisers often run into when they are simply optimising for a metric that looks good on a dashboard, instead of for the metric that will move the needle for their business. A cheap click that doesn't convert is a waste of money, no matter how little it costs.
What higher CPC often means
Higher CPCs can be alarming at first, but there is often a bright side to them. In most cases, the higher cost of the click indicates a more valuable user, with higher purchase intent and less competition for traffic that has greater potential to convert. Industries such as legal services, financial products and emergency home services are excellent examples where you would expect a much higher cost-per-click because a user searching these terms has very high commercial value.
Consider an emergency plumbing service where a user searches 'emergency plumber near me' at 11pm-this user needs immediate attention and has extremely high intent.
Several competitors would see this as a valuable prospect and be willing to bid more for this particular click. This increased competition would raise the CPC, but this user would have much more value than one searching later.
Increased CPCs are sometimes simply a signal that you are entering higher-value auctions.
What should you be optimising instead?
Instead of just focusing on lowering your CPC, the true drivers for business success should be focused on. This would involve questioning what your conversion rates look like based on search intent, the quality of your search terms, cost per acquisition, profit per lead/sale, and how well this traffic aligns with your target customer.
By shifting the focus from simply achieving low costs to achieving valuable outcomes, advertisers can begin to attract high-quality traffic that will lead to conversions and profitable growth. A cheap click that does not convert at all is simply wasted money that quickly becomes expensive.
On the other hand, a higher-priced click that regularly leads to the conversion of profitable customers may be significantly more effective in the long run. High-performing accounts know how to bid appropriately for traffic that will be profitable.
Pay the right amount for the right traffic
The key to success in modern PPC advertising is to pay the right price for the right user, at the right time. This could involve utilising cost-effective advertising in some cases and bidding aggressively in others due to higher conversion opportunity. Sophisticated advertisers aim to acquire higher-quality traffic that can result in greater conversion potential and profitable growth, rather than focusing on the cheapest clicks available.
If your account's CPC has dropped dramatically while your revenue or lead quality have stagnated or fallen, then you may wish to reevaluate where the cost of the click is being reduced from.
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