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Why are click prices lower then max bid?

Especially if someone is clicking on the ad?

     
5:37 pm on May 1, 2006 (gmt 0)

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I'm running ad campaign and for example, lets say the default is .50. When someone clicks on the ad, it actually costs me.36 cents? Why not the whole .50?
If thats what I'm willing to pay, why not the whole price? The site hosting my ad will get a portion of the .36 and google will get the rest. But 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?
Any help would be appreciated.
5:44 pm on May 1, 2006 (gmt 0)

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If your ads are more relevant to users having higher CTR, the cpc will be lower. There is a formula in adwords help support page I remember but you can read it if it really interest you. Anyway, we have no control over it.
5:54 pm on May 1, 2006 (gmt 0)

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Because most advertisers (most people, for that matter) much prefer to pay less than they have to.

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.

11:34 pm on May 1, 2006 (gmt 0)

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...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?
[adwords.google.com...]

AWA

10:08 pm on May 2, 2006 (gmt 0)

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Thanks for posting the link, it makes sense what they are doing, just wasn't sure why it was setup that way originally.
9:32 pm on May 3, 2006 (gmt 0)

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... 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.

AWA