Calculating Inflation in Cost-Per-Click over Time
Calculating the average CPC or Cost-Per-Click for your Pay-Per-Click campaign involves a complicated auction algorithm that needs to utilize several aspects. These include considering the Quality Score, level of competition, your bidding strategy, and incorporating seasonality, among others.
However, you will need to analyze data involving the average position, max bids, and Quality Score for a minimum period of a year to comprehend the actual reasons of the up or down movement of CPC. In that period, you may have made changes to your bidding strategy, witnessed a decrease in the Quality Score, or may have noticed new competitors entering the market, which in turn may have influenced a change in CPC figures.
Hence, you need to calculate the actual marketing cost that has evolved during your campaign. This can be done by initially stimulating the average cost-per-click with regard to a stable ad position that you can set up as Normal CPC.
Next, you can compare the evolution of average CPC at different ranks with the Normal CPC at stable ad positions. You can compare data on a six-monthly basis or for a year depending on your precise requirements and in case you need to make seasonal trend adjustments. Once you extract the data and view it in graph form, you will notice an increase or decrease in average CPC along with average ad position when compared with year over year data.
You will need to utilize statistics to view changes in cost-per-click for stable positions. You can use the exponential regression type in order to analyze the link between position based and CPC after looking at daily data of 2 years. By using an appropriate Excel formula, you will be able to get values that can be further used on different position values. You will now get all your Normal CPCs once you apply the exact same principle for all the months in the collected data.
You can also dive deeper by concentrating on specific months so as to get year-over-year trends based on stable positions. You may easily notice decreased or increased competition on specific positions.
If you genuinely want to calculate the Actual CPC then you need to analyze the Normal CPCs rather than merely accepting average CPCs. This will help account for market inflation as well as read future trends.
An additional benefit is that rather than merely getting flat inflation over all the positions, you will be able to view how CPC inflation changes with positions. You will hence be able to bid with more aggression while avoiding slots that may witness high inflation, which in turn will result in an improved bidding strategy over time.
