Why CPC Rises Without Any New Competitors

CPC went up and the first explanation is always the same: "competition increased". Sometimes it is true. But Google's auction has at least four mechanisms that make the click more expensive without a single new advertiser, and it pays to know them before accepting the default explanation.

Documents revealed in the United States antitrust case against Google showed that the platform itself adjusts auction prices with internal instruments. Add to that the advance of automated bidding and the layout changes on the results page, and there is a set of forces that moves CPC without the list of competitors changing. This article presents each of them and, at the end, a playbook for finding out whether competition really increased.

• How the price of a click is formed
• Google's own pricing knobs
• Smart Bidding from the same old competitors
• The results page changed shape
• Your own account
• How to know if competition really increased

How the price of a click is formed

In the Google Ads auction, you do not pay your bid: you pay the minimum needed to beat the rank of the advertiser right below you and the Ad Rank thresholds, the score that defines whether your ad shows and in which position. That score is recalculated at every search, combining bid, ad and page quality, the competitiveness of that auction and the context of the search.

The consequence is direct: the price you pay changes from auction to auction even if the participants are exactly the same. Anything that moves the thresholds, your neighbors' bids or your quality moves your CPC. In practice, "CPC went up" and "a new competitor came in" are different statements, and the second cannot be deduced from the first.

Google's own pricing knobs

The ruling in the United States case against Google, from August 2024, described three internal pricing instruments, nicknamed pricing knobs: squashing, which artificially raises the runner-up's score and squeezes the price paid by whoever is on top; format pricing, which adjusts prices according to the format shown; and RGSP, used since 2019, which introduces randomness into the second-price auction (the model in which the winner pays based on the bid of the competitor right below). According to the ruling, these adjustments added cost per click incrementally, in doses most advertisers never notice. In the materials presented by the Department of Justice, search CPCs more than doubled between 2013 and 2020.

Mechanisms like these are a familiar topic in auction economics. A classic experiment by Ostrovsky and Schwarz at Yahoo showed that raising reserve prices (the minimum bid the auction accepts) substantially increased search auction revenue without a single new advertiser. In other words, whoever operates the platform can move prices on its own.

Smart Bidding from the same old competitors

Smart Bidding is the set of strategies in which Google itself sets the bid for each auction, paying more when a conversion is likely. When the advertisers already in your category migrate to Target CPA or Target ROAS (goals for cost per conversion or return on ad spend), bids rise precisely on the highest-intent searches, the ones you want most.

The aggregate result is a higher average CPC without a single entrant: the same old competitors, now paying the ceiling that the expected conversion justifies. A collective migration of bidding regimes shows up, in the reports, as an increase in competition.

The results page changed shape

Ad Rank thresholds at the top of the page are higher, and Google states this in official documentation: appearing above the organic results costs more. If a larger share of your impressions starts showing at the top, whether by your own decision or by a layout change, average CPC rises without the auction getting any more contested.

And the layout changes often. In 2016, Google removed ads from the right-hand column on desktop; a CPC explosion was predicted, and the data from the period did not confirm it. Since August 2024, AI Overviews (the AI-generated summaries at the top of the page) have been live in Brazil, changing the distribution of clicks yet again. The two episodes show that layout changes move prices in unintuitive ways, and that attributing any variation to competition is a guess.

Your own account

Finally, it is worth investigating your own account, which usually gets left out of the diagnosis. If your Quality Score (the 1 to 10 grade Google gives keyword, ad and landing page) dropped, you pay more for the same spot, against the same competitors. If the ratio between brand campaigns (searches for your own name) and generic terms changed, the account's average CPC moves on its own: a brand click costs a fraction of a generic one. And broader match types (the setting that defines which searches each keyword can enter), now the default in new campaigns, change the mix of searches you buy and, with it, the average price.

The internal checklist is short: quality stable? Brand ratio stable? Match types stable? Only after those three "yes" answers does the external explanation deserve attention.

How to know if competition really increased

Two Google Ads reports help confirm or rule out the entry of competitors:

• Auction insights: shows who appears in the same auctions as you, how often (the overlap rate) and who ranks above you. A new domain with growing overlap is concrete evidence of an entrant. Mind the limitations: the report only sees the auctions you took part in and does not show data when impression share falls below 10%;
• Impression share lost to rank: measures how often your ad failed to show due to insufficient Ad Rank. If it rises while budget is comfortable and quality is stable, something external is weighing on the auction; if the loss is due to budget, the problem is funding, not competition.

The path is to cross-reference the two reports with the checklist from the previous section: once the internal factors and the platform's mechanisms are ruled out, whatever remains tends to be real competition.

This diagnosis turns into numbers in two other articles in this series, built on a sample of accounts from the Marktech portfolio. The Google Ads benchmark for Brazil brings search CPC, CTR and CPM in reais, with open methodology, to compare against your account. And the study on how much CPC rose beyond inflation follows the same accounts across two years and discounts the IPCA (Brazil's consumer price index), isolating the real increase in the price of the click.