Branded keywords used to be an effective and budget-friendly method for businesses to draw in high-value customers searching for their brand. However, in the past year, the cost for these keywords has seen a dramatic rise.
This article explores the reasons behind this significant increase, its effects on businesses across different sectors, and strategies for maneuvering through this new environment.
The rising cost of branded keywords
Branded keywords have become a crucial aspect of Google’s strategy to maximize revenue from search queries.
In the last year, the price for branded search terms has dramatically increased, especially in certain markets like legal services, where the cost-per-click (CPC) rates have more than doubled compared to 2023.
A look back reveals a consistent and worrying growth in what businesses are spending on their own brand keywords.
The graph below shows data from numerous law firms, illustrating CPC rates for branded keywords along with the cost per contact – defined as a phone call, form fill, text, or chat in legal terms.
In 2018, firms were paying about $1 per click, with around one in five clicks converting into a contact.
Fast forward to today, and CPC rates have increased tenfold while the contact rate has decreased by nearly 40%.
In simple terms, businesses now spend much more per click but gain significantly less value from those clicks.
This raises the question – what drives up the price of a branded search term?
The root cause: Google’s revenue-focused approach
Your brand is an auctionable keyword, and if there’s one thing Google dislikes, it’s a keyword without competition.
When there are no competitors for your branded query, you have the chance to set the auction price, capturing high-value customers attracted by your brand’s reputation efficiently.
Google is known to prioritize revenue over efficiency when it comes to ads.
In a quote from the ongoing Department of Justice price manipulation case, Prof. Michael Whinston remarked on what many have noticed:
- “[Google is] introducing inefficiency into the auction… because it helped them extract more out of the highest – the advertiser most likely to win.”
How Google increases competition on branded terms
Your brand should not be awarded to the highest bidder.
However, over the past year, Google has focused on Performance Max campaigns and AI-driven solutions that encourage advertisers to give control back to Google.
They have added local service ads into your branded queries, placing competitors’ faces in the highest positions of your branded search terms, forcing you to bid for that spot and pushing your organic listings lower.
They have promoted broad match combined with Smart Bidding, which supposedly helps you “capture the brand traffic you want.” In practice, it exposes your branded queries to more competition.
More advertisers are being directed into the Performance Max environment, which only allows for 1,000 account-level negatives to be added.
Although a new branded exclusion tool is available, it requires manual searches for each specific competitor and cannot manage bulk uploads.
This creates significant challenges, even in moderately sized markets.
The blurring of branded and non-branded keywords
Your brand is no longer just your brand; it’s now linked with the service line you provide and will match with those broader, unbranded keywords.
This trend is visible in queries across various legal work lines. Review your non-branded queries and you’ll likely see your brand paired with those keywords.
When users search for your brand, Google might match it to expensive keywords like “personal injury lawyer” – and do the same for each of your market rivals.
Unsurprisingly, costs rise and users receive less relevant advertising.
Recent developments and their impact
In August 2023, Google revealed new brand settings in Search and Performance Max campaigns.
Our agency portfolio of personal injury attorneys witnessed the single largest spike in branded CPC to date.
In November 2023, branded search terms faced another significant setback due to Google’s new “search themes,” designed to employ AI to “ensure comprehensive coverage on important business themes.”
Strategies to combat rising costs
In response to Google’s deliberate brand conflation driving up costs, one effective method is utilizing negative keyword lists.
Surprising, isn’t it?
Currently, we develop over 1,500 negative competitor keywords per client each month using traditional methods.
This has been our main approach to reducing costs, although we’ve observed another price increase recently.
Meanwhile, from May through July 2024, pricing spikes occurred again. The concern is that we may reach a new ceiling and prices may never decrease.
Dealing with soaring branded keyword costs
How can we address this challenge?
Truthfully, it requires a collective effort.
Developing comprehensive negative keyword lists is only part of the solution.
If your competitors – whom we can refer to as allies in this ongoing challenge – don’t take similar actions, your efforts might not suffice.
- Avoid opting in for broad match branding. Keep your keywords precise and protect your brand.
- Use the brand exclusion tool, but don’t neglect regular negative keyword maintenance.
- Avoid letting Performance Max manage your brand. It’s too much of a “black box” product to trust that the AI won’t pursue the auction on another ally’s brand.
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