Algorithm Theory.

This is 100% speculation but,

[jim2003]

I believe that Google is providing a "ranking cap" on certain keywords. By this I mean that no matter what you bid for a keyword, they will not raise it above a certain rank. I believe they are assigning this cap based on a subjective component of quality score.

I am basing this guess on experience I have had with one particular keyword. This word held the #2 adwords spot for months. I was paying an average of 50 cents a click and generating about a 12% CTR. This exact match word generated about 150 clicks per day. Three days ago it suddenly dropped to the number 5 position. On the several days leading up to the sudden drop, the CTR and CPC were both consistent with past experience. The ads that moved above it are not new competition, they have been there for months. I found it unlikely that they all raised their bids or otherwise increased quality scores on the same day.

I went ahead and doubled my bid. AD didnt budge. Doubled it again Ad didnt budge. Doubled it again. Ad didn't budge. The good news is that I am not being charged any more by increasing my bid 8 fold. But I am still stuck in the #5 position. Other than my "capped rank" theory I can come up with no other explanation for this odd situation. Any other ideas?

[bostonseo]

Ahhhh, more information about something big happening since the end of last week. I'm trusting Google less and less these days.

Something is going on - they need to show revenue growth to keep stock prices from plunging even lower.

[venrooy]

I had the same exact experience. I raised the CPC on one of my adwords from .25 up to $100 and it didn't budge from the #5 spot on the page - and the ads above mine were selling $25 products - so there's no way they were bidding over that.

[bostonseo]

I've got terms that I know I'm bidding twice as high on and cannot get the #1 spot. #2 yes, but not #1.

Google is becoming too much of a 'game' if you ask me.

[Quantam Goose]

Guys - when the MBA spreadsheet guys take over the adword game will crash. I have said this before. My cpc rates have more than doubled in the last 60 days to remain in the same position. I am trying the Beta version of MSN (adwords).

[vanillaice]

MBA spreadsheet guys?

[bostonseo]

Quantam Goose,

Only doubled? My prices are 3-4X higher than in July 2005.

Google is getting very greedy (and desperate).

[holyearth]

I've seen this happen (and confirmed it) when a trademarked advertiser bids on their trademarked term and "works out a deal" with Google. There's a keyword out there that no matter how much you bid or how high your CTR, you will not be able to get #1 because this "online shopping giant" company has #1 on it...

[jim2003]

That may explain getting to #1. But I am only trying to get back to #2 or #3 even. I am still interested in any other experiences people have seen of being "capped" at some lower ranking.

[bostonseo]

I have no problem obtaining #2 or #3 rankings, the problem is that Google is now charging like 2 to 3 times for #2 versus #4 position. From a business perspective it makes no sense for me to pay $20 per click for the #2 spot when the #4 spot is $7.

[cline]

There is an economic theory called the "Rule of Three" which postulates that at maturity typical markets evolve to the point where there are 3 major companies, and a variety of small niche companies.

Adwords advertising is working the same way. Only a handful of advertisers on any given term have the CTRs, conversions, and margins to stay at the top. And those top positions are worth a lot in terms of total traffic and sales. The weaker competitors get pushed out, and the niche competitors sit below the fold.