Since September last year, we have been monitoring the cost of Google Adwords for a range of keywords. You can see our full range of data here. We used a broad range of keywords from “Plumbing” to “Mobile Phones”. This gives us a balanced view of the market for Google Adwords. The pool of  keywords is small considering the full range of data available, and if we had more time we might extend it to includes hundreds of keywords.

We then weight the average cost per click for each keyword based on competition, so you can compare how much the advertiser is paying based on the competition for that keyword. This gives you a true idea of the cost of advertising in a market, compared to other keywords and other markets. For example if one keyword has more competition in another market, then you can see if that market is paying more or less for the same keyword would the competition be the same.

There are a few problems with the methodology, but broadly speaking you can see how trends pan out over time and across different markets. In the least we have the raw data to see if the cost of advertising is going up or down.

Since we last looked at this in November, the biggest surprise has been the increase in costs for US advertisers. Virtually all keywords had fallen in competition, but the real and weighted costs had increased. Words like “accountants” and “web design” seeing an almost 100% increase in price. This would be surprising for US companies advertising on Adwords, as their economy still struggles to recover.

All other markets surveyed, showed a relative decrease from September last year in average cost of advertising.

According to Google the average cost of advertising is calculated based on the quality score of the ad multiplied by a factor of the competition for that keyword. In other words, all other things being equal, increased competition should result in an increased average cost. However there are also other factors that Google does not divulge that would dictate the overall price. One of these could easily be Google’s own decisions regarding the amount of revenue they generate through advertising etc.

As you can see in the graph above, over the last few months we have seen how changes in the competition value for particular keywords has not resulted in equal changes to the cost.