The basics of supply and demand markets
The differences between supply and demand markets are shaped not only by economic conditions but also by companies' strategies. In demand markets demand is high and prices are more flexible, while in supply markets companies have greater control over pricing because supply of given products is limited.
In response to market changes, companies typically adjust prices, supply and marketing strategies — however, in the case of Google Ads, this doesn't necessarily hold true.
Google Ads: A world of its own
The Google Ads environment is fundamentally different from traditional markets. Although supply and demand exist here too, advertising competition, algorithms and appropriate advertising strategies — keywords, ad copy, landing page quality — all influence campaign success.
The Google Ads system is a continuous auction: the winner isn't the one who pays the most, but the one who achieves the best Quality Score in combination with their bid. This means a higher-quality ad can rank higher at a lower cost than a more expensive but lower-quality one.
Key difference: In a traditional market, an increase in demand directly increases sales. In Google Ads, an increase in demand also increases competition — which raises cost-per-click and doesn't automatically increase sales.
Case study: Shifting market focus
Consider a real example: an online webshop previously focused on selling food, but now wants to shift focus to the beauty products market. Food sales were working well — but in a new segment, the competitive environment is completely different, buyer intent is different and the conversion path is different.
In this case, the Google Ads strategy needs to be redesigned from scratch. The old keywords, ad copy and landing pages can't simply be carried over — a market shift must be a gradual, step-by-step process. An unexpected 'lane change' is more likely to cause a crash than a faster arrival.
Why can't every market change be directly applied to Google Ads campaigns?
Although market trends can set businesses in motion, these changes don't necessarily achieve the same results in Google Ads. The advertising system employs special mechanisms to optimise competition, algorithms and availability.
- Quality Score dependency — Ad relevance and landing page quality directly influence cost-per-click
- Learning phase — The algorithm needs time to optimise; sudden changes set back performance
- Auction dynamics — In a growing-demand segment, competitors appear immediately, raising CPC prices
- Search intent mismatch — The new market's buyers search for different things and expect different things from ads
Summary
Understanding the Google Ads environment and building strategies based on it requires serious expertise. Traditional market reactions don't always produce the same results in the digital advertising space — and this is especially true when switching market segments.
If you'd like to take advantage of what Google Ads can offer, I'm happy to help with the strategic planning and optimisation of your campaigns.