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For every advertiser that leaves there will be one that joins and although many advertisers will leave their bids below 10 cente/10 pence the competitive nature of PPC will lead advertisers to break ranks and start to increase their bids. What will fuel this is the realisation that as you drop from 1st to 2nd, 2nd to 3rd, 3rd to 4th the number of clicks diminishes, and there will come a point where even at 5 cents because of the lack of critical mass it ceases to become value for money.
Every advertiser that sells something could add a few % to their own prices to cover some of the increased expenditure. This could also be a good time to evaluate the worth of every keyword that has received a click, maybe with a view to rewriting the ads to see if you can't extract more value from it. Changing the title/description will not cause you to have to alter the price you pay.
Look at the scenario :
You sell widgets, you are one of 5 advertisers with Overture. You and 3 of your competitors vote with your CC and go to Google where there are another 5 of your competitors, plus the 3 of you who have left Overture, Your now one of 8 advertisers as opposed to one of 2, where do you think the better "value" will come from?
Every time they increase they move closer to bigger business and further away from the small guys.
Equally though... and this is important... they also tend to move away from the niche/quality information type sites, which sell stuff but not as a PRIME function.
It is the latter that will eventually kill them, because it diminishes their quality. That's the sort of thing that drives visitors to Google, where they can still get the info/quality sites by virtue of the standard (free) returns. It is this that will ultimately condition people not to click on sponsored links (this actually already applies to a large degree already).
For Overture then, this sort of hike equates to: short term gain for long term pain.
If you really think that most keywords are going for a nickel, then you have not been in the same world I am in. I can think of very few keywords of any real importance to us that go for under 20 cents or so.
While we have a few keywords in the 5 to 10 cent bracket, the vast majority of our important ones are in the 15 to 75 cent area.
In fact, this will probably help us as it will get rid of some of the low end clutter. At the very least it will get rid of some of those old grandfathered 1 and 2 cent ads competing with our uncommon keyword ads.