Google to hike ad rates for festive season?

Given the expected strong purchase intent during the upcoming holidays, Google is likely to increase ad rates by at least 15%, say industry experts

by Shantanu David
Published - September 01, 2023
5 minutes To Read
Google to hike ad rates for festive season?

Google Ads is undoubtedly one of the largest advertising platforms, allowing marketers to reach customers through various formats, including search, video and display.  The popularity of Google Ads stems from the fact that it offers a wide range of targeting options and can be used by smaller brands too. However, with the festive season in India having already started, and the larger global holiday season starting with the approach of the justifiably maligned pumpkin spice season, industry experts agree that advertisers are due for a price increase. Though, narrowing down on a figure is as difficult, industry watchers say a hike is coming for sure.

Google Ads doesn’t have a fixed price in India, the cost being determined by a wide variety of factors ranging from the advertisers’ industry, market trends, customer life cycle and more. According to various sources, for Google Search ads, the average CPC is ?20, while average CPM is ?50. Meanwhile, the average cost of Google Display ads typically falls between ?5 and ?10. YouTube ads cost an average of ?.033 per impression.

A senior executive at a programmatic media partner platform points out to the fact that advertisers, both large and small, budget for expenses on these platforms during high-volume sales seasons like festivals and that even if Google does raise its rates, they will be prepared for that. “It’s a platform you can’t afford not to be on, and having obviously kept an eye on the market, they would have made arrangements to have the cash for ad spends, even if higher than expected.”

Dr Kushal Sanghvi, Head of CitrusAd for India & SEA, agrees, saying that Google (especially via YouTube) is likely to raise ad rates for the holiday season of 2023, most likely from the end of October. “Google is a player that is impossible to ignore, whether you're an FMCG or an electronics company or an automotive giant. It's a platform where you need to show your brand off, especially during festive seasons and Google, like everyone else in the market, is aware of that.”

“Given the expected strong purchase intent during the upcoming holidays, Google is likely to increase ad rates at least by 15% not only because they can, but because advertisers will be willing to pay the amount as they need to get their brand in front of customers. It’s the end of the year and people are willing to spend,” adds Sanghvi.

He further points out that given the increasing digital penetration across the country, with mobile internet and the time spent on it, from metros to rural districts, only growing, the landscape that Google offers advertisers is vast and far-reaching, and only growing, mile by mile, screen by screen.

“Brands know that the younger cohorts especially are extremely active and present online, that's where their attention goes and that's where they need to connect with their audiences. Given that increased bandwidth, one could say the increased cost is recompense,” says Sanghvi.

Indeed, Preetham Venkky, Chief Digital Officer at DDB Mudra Group, says it’s only fair. “We've seen inflation in the last two years and this is just a standard response to that. The costs are going up. And every time the first thing inflation affects is the standard cost. And Google is still an extremely sales- driven platform. And as far as India is concerned, you also need to give salary hikes, right? So, I think it will respond to that.”

The fact is that even if the country has been seeing high inflation which, according to a Reuters report published earlier this week, will remain above the Reserve Bank of India's upper tolerance band of 6% at least until October, with a poll of economists by the news organization sharply upgrading price-rise forecasts for this quarter. Indeed, consumer prices in the country “rose at the fastest annual rate in 15 months in July, to 7.44% from 4.87% in June, largely driven by a sharp increase in prices of essential foods commonly used in Indian kitchens.”

The other factor, says Venkky, echoing Sanghvi, is also the growth of the medium itself. “You're now flipped over right? Digital media spends are more than 50% in India itself. And you know how that works. It's a duopoly between Google and Facebook, more so Google. And so that's exactly what they were leveraging.”

“They're also doing it at the right time because I think India Inc is super excited about domestic consumption. And that story will pan itself out and so everybody's gearing towards spending for the end of the year in the last four months as it's always been, though the results will only be visible next quarter,” says Venkky.

“I would expect them to go up to 25-30% but I think 10-15% is just a response to inflationary measures. I think it's fair. But that also doesn't mean that as an agency, we won't negotiate hard. We have every right to challenge their price and look to understand why Google is doing what they are, and get the best deal for our clients.”