The Simple Version
A standard Google Search campaign shows text ads to people who type specific keywords into Google.com. You choose the keywords. You write the ads. You control who sees them.
Performance Max does something different.
You give Google your creative assets — headlines, descriptions, images, videos — and Google decides where to show them. Search results. YouTube. Gmail. Google Maps. Display network. Shopping. All of it, simultaneously, in one campaign.
Google’s algorithm decides which channel, which audience, which format, and which search query to target — based on what it predicts will produce your conversion goal most efficiently.
You provide the assets. Google decides where, when, and who. That’s Performance Max.
What Happened in 2025
Google Ads CPCs rose approximately 18% on average across verticals in 2025.
Some categories — legal, home services, financial services — saw even steeper increases. The national restaurant average hit $1.92 per click. The national legal average passed $8-15 in most metro markets.
Three structural forces drove the increase, and they’re not temporary.
Force 1: AI Bidding Convergence
Smart Bidding and its successors have been adopted by the majority of Google Ads advertisers.
When everyone uses AI bidding targeting the same conversion goals, the auction dynamics change. AI systems bid against each other more aggressively than human managers, and they do so continuously rather than during scheduled adjustment windows.
The result: bid floors rise as algorithms compete. The efficiency gains of AI bidding accrue to individual campaigns, but the aggregate effect on auction prices is inflationary. Everyone’s algorithm is trying to win the same conversions.
Force 2: Performance Max Adoption
PMax adoption reached approximately 72% of Google Ads accounts by late 2025.
PMax’s broad targeting means it generates demand across categories that previously had more contained auctions. Categories that were lightly contested become more competitive as PMax’s algorithm discovers them.
This affects verticals like home services and local businesses disproportionately.
A PMax campaign for a national brand can outbid a local service company on searches that were previously affordable — not because the national brand wants those clicks, but because the algorithm found them.
Force 3: Market Consolidation
Across most verticals, large advertisers have increased Google Ads investment while small advertisers have reduced spend or shifted budgets.
The remaining active advertisers in most verticals are better capitalized and more sophisticated than in previous years. This raises the competitive floor.
Combined with the AI bidding dynamic, the result is auctions that clear at higher prices more consistently than in previous years.
What Well-Managed Accounts Do
The 18% average increase is exactly that — an average. The range around that average is wide.
Accounts with poor Quality Scores, generic keywords, and incomplete conversion tracking pay significantly above the average. Accounts with high Quality Scores, buyer-intent keywords, and complete tracking pay significantly below it.
Quality Score as cost control
Google charges less per click to advertisers whose ads, keywords, and landing pages are tightly matched.
A restaurant campaign at $0.22 average CPC against a $1.92 national average achieves that gap through Quality Score — not budget. As CPCs rise, Quality Score becomes the most powerful cost-control mechanism available.
Conversion data completeness
Smart Bidding optimizes more efficiently when it has complete conversion data.
More conversion signals mean better audience targeting — which means the algorithm finds the right clicks at lower cost. Complete conversion tracking is inflation protection: it lets the algorithm work harder on your behalf.
Negative keyword maintenance
As CPCs rise, the cost of each wrong-intent click increases proportionally. Waste that cost $3 per click in 2023 costs $3.54 in 2025 at 18% inflation. Regular negative keyword review becomes more financially important as prices rise.
