CTR & Bidding and the effect on position

[TheDave]

My understanding is that:

1. You set your maximum bid, which determines your position in the ad listings (ie, higher bids at the top)

2. You only ever pay 1c more than the bid below you

3. Position is also determined by CTR (higher CTR ads at top)

Take this situation, where the ads are also ordered in this way on the SERP:

Advertiser A - 13% CTR, 40c max bid

Advertiser B - 8% CTR, 80c max bid

Advertiser C - 2% CTR, 15c max bid

If Advertiser A's CTR is sufficient to overtake Advertiser B in the positioning (ie, A is shown above B), how much is Advertiser A paying? 16c? 81c? Is it even possible to overtake a higher bid based on CTR alone? Is the CPC determined by the order the ads are displayed in the SERPs, or purely on the order of highest bid to lowest? I hope this makes sense, I was trying to explain to someone how it all works, and got myself confused

[FromRocky]

This is how I understand:

B ad position --> 80*8=64
A needs to take over B --> A ad position at least higher than 64. To achieve this, A will pay 65/13= 50c

Thus, A needs to pay only $0.50 to take over the top position.

B will be in the second position and needs to pay only 5c since 5*8 > 15*2. (5c is minimum)

C will be in the third, pays 15c. If this is the bottom position, C will only pay a minimum or 5c.

[jino]

[webmasterworld.com ]

From the horses mouth... so to speak.

[TheDave]

Thank you :) I'm less confused and I'm sure after I read it a second time it will sink in. ;) At least I get the general idea of it now, thanks. Might even build a little spreadsheet to test some scenarios

edit - Spreadsheet was too much effort, I made a little bid simulator: [boodizm.net...] (mods can delete this if inappropriate or useless..:P)

[OneThingWell]

IMHO There is no greater thing about Adwords than the fact that CTR is "real money." What do I mean? CTR is not watered down by some factor when being multiplied by the bid.

I am rewarded for my work on Match Type, Titles, Descriptions, Negative Matches, Bid Adjustments, Distribution Tweaking, Display URLs, and all the rest with "Real Money."

When I first start a new campaign I run an unoptimized, basic, throw-it-all-in-one-ad and run it a few days. Then I start fine-tuning, and I watch the CTR improve. Now I can even predict with reasonable accuracy how much we can improve a clients' Adword Campaign.

This is why I'm trying to do OneThingWell ;) which is Adwords!