What Average CPC Tells Us About Retail Ad Performance on Google, Facebook and Amazon in 2020

Retail marketers will all agree: facing less competition while engaging more shoppers is an ideal scenario. That was the incredibly unique situation many retail marketers faced at the start of the pandemic in 2020, according to cost-per-click (CPC) trends my company, Sidecar, culled from Google Ads, Facebook, Instagram, and Amazon.com.

After the pandemic hit, demand from online shoppers peaked. At the same time, many retail advertisers reduced ad spend because of issues with supply or due to economic uncertainty. That led to a flood of highly motivated shoppers engaging with retailers’ ads in a much less competitive environment across channels. As a result, CPCs hit their lowest point in 2020 during the first months of the pandemic.

Sidecar analysts evaluated these CPC trends in our recently released 2021 Benchmarks Report. The report is an annual and award-winning assessment of online performance marketing, covering the retail industry. We explored advertising trends on Google Ads, Facebook, Instagram, and Amazon, providing a full picture of the state of online retail marketing.

It’s fascinating to track how CPCs fluctuated throughout last year, sometimes in identical ways across marketing channels. We dug into the data from our report to map CPC trends and understand why retailers in these channels experienced CPC spikes and declines at different times of the year. Here are some of the key lessons we learned last year.

Amazon’s Absence Drove Down Costs on Google Ads

In March 2020, Amazon pulled its shopping and paid search ads on Google. This move was a reaction to a surge in orders, which the marketplace was racing to fulfill. Amazon’s absence on Google Ads created significant opportunities for retailers. CPCs declined as competition decreased and consumer demand increased.

Interestingly, paid search and shopping ads performed similarly in terms of CPC in 2020, with dips at the start of the pandemic and increases as retailers and shoppers regained confidence. That confidence reached its peak during the year-end holiday shopping season.

Despite CPC growth throughout the year, CPCs were down 9 percent year-over-year on Google Shopping, averaging $0.56 for the year. Google paid search experienced a larger CPC decline of 14 percent year-over-year, averaging $0.62. That overall drop made Google Ads a more affordable platform for retailers looking to expand their customer base.

Social Media Experienced an Engagement Surge

We saw similar CPC performance on Facebook and Instagram Advertising in 2020. Cost declined at the start of the lockdown in March 2020 and April 2020 in both channels. Again, a mixture of increased demand from consumers and decreased competition drove these trends.

What’s unique to social advertising is that CPCs rose much more rapidly than they did on search. This may speak to the time that consumers spent on social media in 2020. According to eMarketer, consumers spent 82 minutes per day on social media last year, increasing their usage 8 percent year-over-year.

Facebook CPCs averaged $0.57 in 2020, while Instagram CPCs averaged $0.87. Instagram was the most expensive channel to advertise on in terms of CPC, and the only channel where CPCs increased year-over-year (+1 percent). Those two trends may be due to increased competition for limited inventory in the channel.

There’s Still Room for Growth on Amazon

Unlike search and social, Amazon CPCs rose throughout 2020, with gradual growth in the first half of 2020, and then significant jumps during Prime Day in October and the year-end holiday in November.

One reason for the steady increase in CPCs may be that Amazon is a less saturated advertising channel than more established platforms like Google Ads or Facebook. The fact that Amazon boasts the lowest average CPC of any marketing channel we studied, just $0.39, supports this theory. We may see CPCs climb even higher in 2021 and beyond as more retailers begin to invest in this channel.

CPC paints a valuable picture of competition and opportunity in 2020, but it’s just one lens that retailers can use to view performance marketing data. I encourage you to get the full picture of shopper behavior and competitor trends in the complete 2021 Benchmarks Report, which you can explore further here.

Sam Pettinati is a senior solutions analyst at Sidecar, a tech company specializing in retail technology.