Google Search Ads in Q1 2025: Higher CPCs, Stable Click Growth

Spending on Google Search ads rose by 9% year-over-year (YoY) in Q1 2025, slightly down from 10% growth in Q4 2024. While click volume grew modestly at 4% YoY, the bulk of the increase came from a 5% rise in CPCs, signaling that advertisers are paying more for each click without a proportional rise in traffic. Key Google Search Metrics:

• Spending growth: +9% YoY
• Click growth: +4% YoY
• CPC increase: +5% YoY

Google Shopping Ads: Stable CPCs, Rebounding Click Volume Google Shopping Ads continued to show strength, with 8% YoY growth in spending, though this was down from 10% in Q4 2024. Unlike search, Shopping saw an impressive 9% growth in click volume, up from just 1% last quarter. Interestingly, the average CPC for Shopping ads decreased slightly by 1% YoY, making it a more cost-effective channel. Google Shopping Breakdown:

• Spending growth: +8% YoY
• Click volume: +9% YoY
• CPC: -1% YoY

Performance Max (PMax): High Adoption, But Declining ROI Despite a 93% adoption rate among retailers using Google Shopping ads, Performance Max (PMax) campaigns are seeing reduced effectiveness. PMax accounted for 53% of Shopping ad spend, down from 69% in Q4 2024, as advertisers seek more control and better performance via standard Shopping campaigns. Performance Max Performance:

• Conversion rate: 10% lower than standard Shopping
• CPC: 13% higher than standard Shopping
• ROAS: 7% lower than standard Shopping

Advertisers are increasingly pulling back from PMax due to its higher costs and lower return on ad spend, emphasizing the need to balance automation with performance control. Microsoft Advertising: Outpacing Google in Growth Microsoft Search ad spending surged by 17% YoY in Q1 2025, accelerating from 7% growth in Q4 2024. Click volume grew 5%, reversing a 3% decline last quarter, while CPCs jumped by 11% YoY. Notably, brand keyword CPCs saw a sharp 19% increase, signaling more competition even on branded terms. Microsoft Advertising Highlights:

• Spending growth: +17% YoY
• Click growth: +5% YoY
• CPC growth: +11% YoY
• Brand CPCs: +19% YoY

With stronger performance and improving ROI, Microsoft is becoming a viable alternative for advertisers looking to diversify away from rising Google costs. Competitive Landscape: Major Retailers Hold Ground, Temu Exits In the Google Shopping auction, Amazon remains dominant with a 60% impression share, followed by Target (24%) and Walmart (22%). However, Temu dramatically pulled back from Shopping ads in early April 2025 amid U.S. tariff changes, dropping to zero impression share by mid-April. This political shift could influence auction dynamics and CPCs in the months ahead. What This Means for Advertisers As Q1 2025 data shows, rising CPCs and fluctuating platform performance are reshaping digital ad strategies. Here are key takeaways for marketers: 🔑 Key Takeaways:

• Google CPCs are rising, making efficient keyword and budget management critical.
• Shopping ads remain resilient, with strong click growth and stable costs.
• Performance Max may need reevaluation, especially for brands seeking higher ROAS.
• Microsoft is gaining traction—consider it as part of a diversified media mix.
• Political changes like tariffs impact ad presence, as seen with Temu’s exit.

Final Thoughts The Q1 2025 digital ad trends show that while Google continues to lead in scale, advertisers are feeling the pressure of rising costs. With Microsoft Search gaining momentum and shifts in platform strategies like PMax adoption, the landscape is becoming more dynamic. Staying informed and agile will be key to maximizing performance in an increasingly competitive market. 👉 Need help optimizing your search ad strategy? Let’s connect and build a data-driven plan that adapts to these evolving trends.