The Changing Landscape of Paid Search: Rising Costs and Decreasing Clicks

Paid search has been a key part of digital marketing for a long time. It used to be reliable and easy to track. But things are changing. AI is changing how people use search engines, and this is affecting marketers. Costs for ads are going up, while the number of people clicking on ads is going down. Some industries are finding it hard to keep up.

If you relied on paid search for your brand, it's time to rethink your strategy. The channel is still important, but it's not a surefire way to grow anymore.

In Australia, companies spent $7.2 billion on search ads in 2024, a 10.1% increase from the year before. But the return on this investment is not as good as it used to be. Google's ad costs went up by 17% while the number of people clicking on ads dropped below 2%. In industries like finance, healthcare, and retail, the numbers are even lower.

This is not just a temporary problem. AI-generated answers are taking up more space on search results pages, often appearing before paid ads. This means users can get the information they need without clicking on any ads. When your ad is not seen or clicked on, the higher costs start to hurt your business.

Google's Search Generative Experience (SGE) is being tested in Australia. It aims to keep users on Google for longer, but this means less visibility for paid ads. As AI takes over the top spots on the page, paid ads are pushed down, sometimes out of view, leading to fewer clicks.

Now, 65% of searches end without a click, according to SimilarWeb. This means the traditional model of paying for clicks is becoming less effective.

Many industries are facing strict rules on the keywords they can use in ads. Healthcare and financial services are especially affected. Even when ads are approved, they can still face sudden rejections or limited visibility due to automated policy checks.

Despite these challenges, many marketers still spend a big part of their budget on search ads. But this strategy is becoming less effective. Search is now more of a support channel, useful for specific types of searches but not as powerful as it used to be.

Brands that will succeed are those that diversify their marketing budget. They need to invest in other channels like Paid Social, Connected TV, Audio, and Digital out-of-home. These channels can build brand awareness and drive traffic without relying on search clicks.

The way we measure success in marketing is changing. It's no longer just about clicks. Metrics like branded search growth, direct traffic, and cross-channel impact are becoming more important.

The bottom line is that clicks are down, costs are up, and the search engine results page is getting more crowded. Paid search is still valuable, but it should be part of a broader marketing strategy. It's time to adapt to these changes.

According to the source: Mediaweek.