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Now all of a sudden some fool is targeting my keywords with eBay. His ad is totally irrelevant. eBay won't even return a result for the keyword. It's nonsense.
When this person's ad gets a low quality score, it causes his min bid to increase. This really isn't an issue if no one clicks your ad to begin with.
Essentially these low quality ads that target thousands of keywords are actually raising your cpc because they are being forced to up their own.
If I go from paying .02 cpc to .04 cpc at 5K clicks a day, that is a large increase. The ad that no one clicks might have a min bid of .50, but no one clicks it so it really doesn't hurt.
It seems like penalizing low quality ads ends up hurting the high quality ads much more than the low ones.
It's not the Overture bidding model, those in lower positions aren't necessarily paying less and causing higher ads to bid more.
Based on your example, I'd bet that "fool" is paying a much higher CPC than you.