LucidSW - 1:11 pm on Sep 23, 2011 (gmt 0)
> Also, the first position gets a "discount" for being there.
> Huh? I'm almost certain this is not true. In fact, there's been a
> lot of speculation over the past 5 years or so that you actually
> need to pay a premium to get the #1, yellow box spot.
First, the first position is not necessarily the yellow box. Not every search results in a "yellow boxing" of ads.
Second, I was not talking about being above the SERPs (yellow box). I was saying that my data shows a lower CPC when an ad is in first position, above the SERPs or not. That doesn't prove there is a discount of course but it's strong evidence. And my evidence is, backed by lots of data, that ads in the first position pay less. Not a huge amount, half a cent most times but other times a cent or two less than the second and lower positions.
The algorithm is there to maximize profit for Google, there's no question about it. But most people think of it the wrong way. It's not there to _force_ you to pay $1 or whatever amount. The algo doesn't say "I'll increase the minimum first page bid to make more money". It's all driven by the the advertisers.
The system is trying to make you increase quality, that's what QS is all about. Google would rather you have higher quality than bidding more. Make the calculation yourself: they make more money with a higher quality ad getting a 5% CTR and paying $0.20 then one having a 2% CTR (lower quality) and paying $0.40. The first one makes them more money for each 100 impressions even though they pay less so which do you think the algo chooses.