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If you walk into a car dealer and see a car listed for $15,000, do you complain to the manager that he's willing to sell it to you for less than the MSRP of $18,000? Are you going to demand that he allow you to pay the full $18,000. Or are you going to be thrilled with the $3,000 discount and use that money for something else?
Google's model is not a straight pay-what-you-bid-for model. It combines relevance, click-through rate, and porbably other factors they don't mention.
...since I'm running adsense, should i also be upset that if i get paid .40 for a click, that i may not even get the person's default bid of say .60?
Think for the long-term youfoundjake. If you are running AdSense, you'd be happy that, over time, there will be an increasing number of happy advertisers who are making an excellent return using AdWords - and showing targeted ads on your site.
Here's a blurb on the subject of 'paying less' from the AdWords Help Center:
Pay less for more results: Keep in mind that because of our AdWords Discounter and dynamic ranking system based on your maximum CPC and Quality Score, your actual CPC (what you actually pay per click) is often less than your maximum CPC (what you're willing to spend per click) and often decreases when your ad starts to perform better. Remember: The higher the quality of your ad, the lower its actual CPC.
And here is a link to info with the ad rank formula that Porter5Forces was referring to:
How are ads ranked?
... just wasn't sure why it was setup that way originally.
I guess I'd sum it up by saying that the intent was (and is) to motivate and reward advertisers to create very relevant ads (and thus a very positive user experience) by giving them the chance to pay less.