Monday, July 25, 2016

The After Effects of Brexit on Global CPCs

Great Britain has been a major player on the global stage for centuries. Its empire stretched across seven continents and its people and culture span the globe. With the fifth-largest economy in the world, British companies have major stakes throughout all of Europe and abroad. The United Kingdom is a union of four separate countries and her ambitions have always stretched across her shores. That’s why British pundits, statisticians, and much of the rest of the world was surprised to see the U.K. nationalist vote to leave the European Union in the Brexit vote on June 23, 2016.

The long-term implications of Brexit will play out across government bodies, global markets, and the news cycle over the next several years and decades. And while many of the consequences of Brexit remain uncertain, there’s one surprising place we’re already seeing major changes – the Google SERP.

Given Britain’s global economic connections and its large service-based economy, advertisers all over the world use Google AdWords to serve ads within the U.K. and pay for their advertising costs in their native currency, the British pound. Google charges no tariff for international advertisers and seamlessly converts bids in international currencies to play alongside domestic advertisers, putting both on a level playing field in the AdWords auction. Occasionally, this can make for in interesting game for advertisers.

Consider the British market following the June 23 Brexit vote. The British pound quickly depreciated to the U.S. dollar overnight, hitting a 31-year low. Since then, the GBP has remained weak to both the USD, EURO, CAN, AUD, and other international currencies.

Brexit impact on global CPCs British pound depreciation against US dollar

The GBP depreciated 10% to the USD following the Brexit vote and the GBP and British economy has stagnated since.
Source:
Yahoo Finance

Meanwhile, on the Google SERP, local advertisers in the U.K. began to feel the pains of a relatively weak pound to other international advertisers, many from the other EU countries, the U.S., Canada and Australia. British advertisers have found their CPC on the SERP rise while many international advertisers are seeing U.K. clicks at a serious CPC discount.

Brexit impact on global CPCs global CPC comparison graph  

American, European, and Australian advertisers have seen their CPCs in the U.K. fall in accordance with the increased value of their currency in Britain. Australian clients in particular have seen their CPCs in the U.K. drop by 23% over the past month. During the same period, the GBP has depreciated roughly 18% to the AUD. These reduced CPCs may make advertising in the U.K. particularly advantageous for international clients.

Interestingly, we saw something similar happen a few years ago when the Russian ruble fell rapidly to the USD following the Russian occupation of Crimea. During late 2014, when the ruble fell 26% to the USD, American advertisers found their CPC in Russia drop at a similar 21.5% rate.

The United Kingdom will be going through a lot of changes over the next few years. While most of those changes will be seen prominently in the news around the world, if you keep your eyes open, you may see those changes appear in more mundane places like your AdWords account. Regardless of whether you’re based in the U.K. or not, these changes pose unique challenges and opportunities for British and international advertisers everywhere.

Data Sources

Data is based on a sample size of 6,861 accounts (WordStream clients) advertising within the United Kingdom on the Google Search Network between June 6-July 17, 2016.

About the author:

Mark is a Senior Data Scientist at WordStream with a background in SEM, SEO, and Statistical Modeling. He was named the 14th Most Influential PPC Expert of 2016 by PPC Hero. You can follow him on Twitter, LinkedIn, and Google +.



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