skibum - 8:24 pm on Aug 4, 2012 (gmt 0)
If the system raises the bid when the ad is already in the top spot (especially if it is a high volume keyword), then the system needs to be adjusted or the keyword needs to be managed manually. There are the ROI calculations that lots of bid management systems work off of to determine what the bid should be and then there is the reality of the bid marketplace. Those bid management ROI calculations for setting bids worked better in the Overture model than today's bid environment.
When an ad has a high CTR and ranks near the top, one way I found to make a lot more money from it is to drop the bid to #0.01 below the actual current CPC for that keyword. This may or may not cause the ad to drop in the rankings (it probably will drop a little bit in most cases) but the average CPC can drop dramatically while volume stays almost unchanged and profits go up.