Tricky CPC question

CPC when combining the 1-cent discounter and CTR

[NewNick]

Assume the following:

1. My maximum CPC is $3 and the ad's CTR is 1%, which in this example would give me the top position on the page. I need a rank number of .03 (initial maximum CPC x initial CTR) to keep this top position.

2. Now, I change my ad copy to make the ad more relevant and suddenly CTR rises to 2%. I'll only need to pay $1.50 to keep my ad in top position, since the rank number 0.03 = $1.50 x CTR 2%. With a more relevant ad I pay less for occupying the top spot. Fine

Here's my questions:

- If the next lowest bid is $2, do I still pay $1.50, or $2.01 (one cent above the next lowest bid).

- If the next lowest bid is $1, do I still pay $1.50, or $1.01 (one cent above the next lowest bid)

[vibgyor79]

Ugh. I hate math problems.

If the next lowest bid is $2, do I still pay $1.50, or $2.01?

$1.50, assuming your competitors' ad CTR remains constant

If the next lowest bid is $1, do I still pay $1.50, or $1.01?

Depends on the CTR of your competitors. If it is the same as yours, you will be paying $1.01.

[NewNick]

Thanks vibgyor79. I don't really like math either, I'm just trying to figure out how AdWords bidding/position rules work in practice for different situations.

[Furmanov]

When you mention CTR in this thread what CTR you are talking about? today's ctr? yesterday's ctr? average ctr for some period (last week, last month or from the moment the ad was started?)

Where can I read more about AdWords bidding/position rules?