Generally, the CPC for each keyword is calculated as a function of advertiser's bid, quality score and competition.
You can see from the graph above that over the last three months, the average CPC has remained the same. We have covered these changes several times in the past . The cost of advertising relative to competition, however, has fallen slightly.
This means that there has been an increase in competition across the three markets that is proportionally greater than the change in the cost of advertising. There are a few explanations for this;
- Advertisers have increased their quality score, or Google has changed the calculation
- Advertisers are willing to bid a lot less for each keyword
- Google has another, unspoken, component of the calculation, possibly called "Google's Profit Target"