Why Is Exact Match So Expensive in Google Ads?

By: Jyll Saskin Gales, Google Ads Coach

Have you ever wondered why exact match keywords in your Google Ads campaigns seem to cost a small fortune while broad match keywords are cheap? It all comes down to the auction system and competition for those coveted queries

In Google Ads, you're bidding against other advertisers for the chance to show your ad to potential customers. Everyone wants the same prize: the users who are highest intent and closest to conversion. The more people bidding, the higher the price goes.

Let's break down the reasons behind the cost differences between exact match and broad match keywords so you can find the best strategy for your business.

Here's what we'll cover:

• Understanding the Google Ads Auction: We'll explore how the auction system works and why keyword competition influences costs.
• Exact Match vs. Broad Match: We'll dive into the differences between these match types and their impact on ad relevance and cost.
• Analyzing Cost and Conversion: We'll examine how to evaluate the trade-off between cheaper clicks and lower conversion rates.
• Experimenting for Success: We'll discuss how to run A/B tests to determine the most effective match type for your campaigns.

The Google Ads Auction: A Bidding War for Keywords

Imagine a crowded auction room where everyone is vying for the same antique vase. The more people who want it, the higher the bids will climb.

Similarly, in the Google Ads auction, advertisers compete for ad space based on the keywords they choose.

Exact match keywords target very specific search queries, like "best Italian restaurant in Toronto." These keywords are highly sought after because they attract users who are likely ready to convert. Consequently, competition is fierce, driving up the cost per click (CPC).

On the other hand, broad match keywords cast a wider net, matching to a broader range of searches. Like "Italian food" or "Mediterranean restaurant" - potentially still useful, but not as relevant as "best Italian restaurant in Toronto." This means less competition and lower CPCs, but the trade-off is that the searches might be less relevant to your business, and less likely to be profitable.

Finding the Sweet Spot: Balancing Cost and Conversion

While broad match may seem appealing with its lower CPCs and wider reach, it's crucial to consider your conversion rates. Conversion rate is the percentage of clicks that turn into desired actions, like a purchase or a sign-up.

Let's illustrate this with an example. Suppose your exact match keywords have a $5 CPC and a 2% conversion rate, resulting in a $250 cost per acquisition (CPA). For comparison, perhaps your broad match keywords have a $2 CPC and a 0.5% conversion rate, leading to a $400 CPA.

In this made up scenario, you get more clicks with broad match, but they convert at a lower rate, making each conversion more expensive. The question is, would you rather have fewer, more qualified clicks that are more likely to convert, or a higher volume of less qualified clicks?

Calculate these numbers for YOUR business to see how it shakes out. It could be that broad match keywords deliver a lower CPA than exact match in your business, or a higher ROAS - every Google Ads account is different.

A/B Testing: The Key to Finding the Right Strategy

The best way to determine the most effective match type for your business is to conduct A/B testing. Split your campaign into two identical versions, one using exact match keywords and the other using broad match keywords. Use Google's Experiments feature to run a true fair test. Then, monitor the results over time.

Remember, patience is key! Don't jump to conclusions based on early data. Wait until Google Ads indicates statistically significant results before making any decisions.

By carefully analyzing the data and understanding the trade-offs between cost and conversion, you can optimize your Google Ads campaigns for maximum effectiveness. Whether you prioritize highly targeted clicks or a larger volume of traffic, the key is to find the keyword match type that aligns with your business goals.