Google Ads just got more expensive – here’s what you need to know
Mumbai: Google Ads is set to become costlier as the tech giant announces price hikes across its advertising platform. This move comes amid increasing operational costs, regulatory challenges, and evolving ad market dynamics. With higher CPCs (cost-per-click) and CPMs (cost-permthousand impressions), businesses will need to rethink their digital ad strategies to maintain ROI. What’s driving these changes, and how can advertisers adapt? Let’s break it down.
The factors contributing to the high costs is an increased competition, as more businesses invest in online advertising, the demand for ad space has intensified, leading to higher costs per click (CPC).
Google has also admitted to modifying its ad auctions to meet revenue targets, sometimes increasing prices by up to 10% without informing advertisers. It has also identified sectors, such as legal services and home improvement, experience higher CPCs due to their competitive nature.
These cost increases necessitate that businesses regularly evaluate and adjust their advertising strategies to maintain profitability. Staying informed about industry trends and optimizing ad campaigns are essential steps to navigate the evolving landscape of digital advertising.
MadeInMedia.in’s Kalpana Ravi spoke to industry experts on the impact this will have on their brands budgets and how are they going to be tackling this higher costs…….
Excerpts:
Russhabh R Thakkar, Founder and CEO, Frodoh
The integration of AI-powered tools like Gemini is significantly influencing advertising costs in India. A study by Teamlease Digital revealed that AI adoption in key Indian sectors reached approximately 48% in FY2024, with the banking and financial services industry leading at a 68% adoption rate. This widespread adoption is intensifying competition for AI-optimized advertising spaces, leading to increased costs per click (CPC) and higher overall advertising expenditures.
The sectors that are most affected include Banking and Financial Services (BFSI), with a 68% adoption rate, leveraging AI for predictive modeling and targeted advertising, intensifying competition and driving up advertising costs. The Pharma and Healthcare sector, with a 52% AI adoption rate, uses AI for customer insights and personalized marketing, contributing to increased advertising expenses. Similarly, the Fast-Moving Consumer Goods (FMCG) and Retail industries, at a 43% adoption rate, utilize AI for content creation and creative optimization, creating a more competitive advertising landscape.
As advertising costs escalate, brands and advertisers in India are reassessing their reliance on Google. Many are diversifying advertising channels, investing in social media platforms, retail media networks, and connected TV (CTV) to reach audiences more cost-effectively. Additionally, businesses are leveraging AI-driven analytics to optimize ad spend and enhance ROI.
In conclusion, while AI advancements offer enhanced targeting and personalization capabilities, they also contribute to increased advertising costs. Indian brands and advertisers are proactively adapting by diversifying their advertising strategies and leveraging AI to maintain cost efficiency in this evolving landscape.
Shivashish Tarakas, Founder and CEO, The InterMentalist.
There has been a change in the pattern of how users search and this is mainly due to the role of AI. This hike in prices by Google will make agencies and brands re-work their strategies. As AI Adoption increases, there will be changes in platform policies and brands will have to go to the boardroom and reassess their investments and strategies. This hike in prices may work well for sectors like D2C or upcoming brands and may have an altogether different approach for brands in BFSI, FMCG and the mass sector. The focus will move on larger impactful campaigns and a short-term approach may not work in paid marketing.
Sunitha Natarajan, Director – Digital Strategy, Social Panga
I have noticed a shift in how we search. We are not just looking for links anymore; we want answers. This AI-driven change has skyrocketed ad costs, forcing brands to rethink their Google strategies. I believe the future lies in a more integrated approach to organic and paid search. Instead of separate silos, we need a holistic strategy focused on user lifetime value and retention. By creating valuable, engaging content and strategically using paid promotion, we can connect with customers meaningfully and build lasting relationships.
Siddharth Devnani, Co-Founder & Director, SoCheers
The digital advertising landscape is in constant flux, and Google’s recent ad rate adjustments are a testament to this dynamic environment. In the fiscal year ending March 2024, Google India reported an 11% increase in gross advertising revenue, reaching ₹31,221 crore, up from ₹28,040 crore in the previous fiscal year.
This surge is influenced by several factors: intensifying competition, rapid advancements in AI-driven advertising, and a growing demand for premium ad placements. As the effectiveness and precision of targeted digital advertising improve, so does its perceived value—and consequently, its cost.
For advertisers, this means it’s time to sharpen their strategies. The AI market in India is projected to grow at a compound annual growth rate (CAGR) of 27.86% between 2025 and 2030, reaching an estimated market volume of $28.36 billion by 2030,, leveraging AI isn’t just an option; it’s becoming a necessity. Embracing data-driven insights and fine-tuning campaigns will be crucial to maximize return on investment in this evolving landscape.
In essence, as the digital ad space becomes more sophisticated, advertisers must adapt by becoming more strategic, ensuring every dollar spent is optimized for the best possible outcome.