‘CPC pain is real’: One year on, Google’s AI Max has pushed up search budgets – and costs

Unlike traditional methods of targeting search campaigns, AI Max generates target keywords and queries using a brand’s chosen landing page, creative and keywords as inputs. The result is an evolution away from keyword-based auctions, toward a market anchored around intent. Google claims that this technique enables advertisers to catch users they’d otherwise miss, leading to an average increase in conversions of 7%. The product was introduced May 6 last year and left beta status last week.

Since its launch, it’s become a go-to ad type for performance marketers. “Almost all of our clients are using AI Max. We found it to be an incredibly effective way to run our search campaigns,” said Lauren Beerling, group director, performance media at Collective Measures.

David Dweck, president at Go Fish Digital, said AI Max has replaced clients’ use of broad match campaigns — which used AI to target a chosen keyword phrase, plus similar queries — for many clients. “We’re firm believers that AI Max will be the most widely adopted ad type in probably one to three years,” he said.

Beerling said the agency had found it an effective way to target the growing “long tail” of conversational queries, and stay on top of shifting search user behavior. That had contributed to a rise in overall search spending, she said in a follow-up email. “AI Max is also opening up query space our clients weren’t previously bidding on,” she added. “For the clients leaning into that as a growth lever, we’re seeing roughly 7% to 10% year-on-year spend growth tied to it.”

Dweck said Go Fish’s clients had increased search spending by 15% year-on-year, though he did not provide specifics. 

Buyers say they have been generally impressed with the transparency offered by Google around AI Max, at least relative to the grumbles that accompanied the rollout of Performance Max. But higher spending isn’t necessarily a sign of approval.

For some brands, it’s part of an effort to counter falling web traffic as fewer users advance beyond search results pages. AI Max is also the gateway to running ads in Google’s AI Mode or adjacent to its Overviews, making it an important lever for brands worried about losing top-of-funnel traffic to zero-click users. Google told Digiday sister title Modern Retail that some brands credited an 80% sales uplift to AI Max ads in those environments.

“It’s because of SEO being less valuable,” said Dweck. For brands that had seen traffic decrease following the introduction of the AI Overview, paid search was one way to “prop up” performance, he noted.

For other advertisers it’s a consequence of rising CPC rates. Mediaplus clients had, on average, seen CPCs rise 10-15% within the last year, according to Nick Tong, the media agency’s managing partner of media and data. “CPC inflation is definitely happening to a number of different advertisers,” he said.

Beerling concurred. “For clients facing increased auction pressure, we’re typically seeing CPC increases in the 10% range, with some clients impacted as high as 25%,” she said.

The rise in CPCs is likely a consequence of rising competition between advertisers in search auctions. Google’s AI creative features have lowered barriers to entry for some brands, while advertisers have been left competing to bid against keywords unaffected by Overviews or AI Mode.

“AI Max has sort of opened up these elements a little more aggressively for our competitors, for ourselves, for [everyone]. It’s a more open game,” said Paul Low, head of search at PMG.

With a larger number of brands bidding across a smaller surface area, Adthena estimated that the number of advertisers participating in search ad auctions had increased 35% year-on-year.

“The CPC pain is real,” said Ashley Fletcher, chief marketing officer at Adthena.

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Google began adding AI creative features to its search ads with the introduction of Dynamic Search Ads (DSAs), which are due to be sunset in September. It’s accelerated the rollout of those features with AI Max, and is now emphasizing automated creative as a selling point. Google added AI Brief, a feature that lets advertisers guide campaigns by describing messaging, targeting and audience constraints instead of managing keywords and lists manually while expanding AI Max into shopping and travel campaigns.

Low said that advertisers initially stayed clear of the AI creative tools. “Anecdotally, at the beginning, there was almost no adoption of the Creator or URL features,” he said. Brands with long-treasured brand slogans or straplines are likely to continue their caution, but a year on from AI Max’s launch, he said clients had begun to embrace their use with less caution.

“We’re broadly positive on using those features where you can,” said Chris Rigas, vp of media at Markacy.

Tong said the introduction of AI-led creative features in search had led to the agency’s channel experts altering their focus. “In the old days, our search planners would be writing ad copy… [now] it’s much more around analyzing the data and making changes [to plans] rather than building ad groups,” he said.

Low agreed, noting that “the nature of the game is changing.”