Increasing bid always increases CPC?

[Tonearm]

If Google puts my ad in position 1 for a keyword with a 10/10 quality score even though others are bidding more than I am, and my system later increases the bid, would Google increase my CPC even though I'm already in position 1 due to my quality score?

If the answer is yes or maybe or sometimes, what is a good method for finding the sweet spot where you get the benefit of your quality score but don't pay more than you have to?

[idolw]

I think the whole Adwords system is about paying just $0,01 more than the ad below you. So you will only pay more if the people under you increase their bids.

[Tonearm]

I think the whole Adwords system is about paying just $0,01 more than the ad below you.

From what I understand, Google can position your ad above the ad of others who are bidding more than you if you have a superior Quality Score. Thus my question....

[skibum]

If the system raises the bid when the ad is already in the top spot (especially if it is a high volume keyword), then the system needs to be adjusted or the keyword needs to be managed manually. There are the ROI calculations that lots of bid management systems work off of to determine what the bid should be and then there is the reality of the bid marketplace. Those bid management ROI calculations for setting bids worked better in the Overture model than today's bid environment.

When an ad has a high CTR and ranks near the top, one way I found to make a lot more money from it is to drop the bid to #0.01 below the actual current CPC for that keyword. This may or may not cause the ad to drop in the rankings (it probably will drop a little bit in most cases) but the average CPC can drop dramatically while volume stays almost unchanged and profits go up.

[idolw]

From what I understand, Google can position your ad above the ad of others who are bidding more than you if you have a superior Quality Score. Thus my question....

Of course, sorry, my comment was based on the assumption your QS stays at 10/10 which is when only CPC counts (you already have max available QS).

[Tonearm]

If the system raises the bid when the ad is already in the top spot (especially if it is a high volume keyword), then the system needs to be adjusted or the keyword needs to be managed manually.

OK, then the unfortunate answer to my original question must be yes.

There are the ROI calculations that lots of bid management systems work off of to determine what the bid should be and then there is the reality of the bid marketplace. Those bid management ROI calculations for setting bids worked better in the Overture model than today's bid environment.

This is the stuff I have no idea about. Could you tell me a bit more? It sounds like the algorithm that sets my bids needs to be more sophisticated. What factors should be considered besides ROI?

When an ad has a high CTR and ranks near the top, one way I found to make a lot more money from it is to drop the bid to #0.01 below the actual current CPC for that keyword. This may or may not cause the ad to drop in the rankings (it probably will drop a little bit in most cases) but the average CPC can drop dramatically while volume stays almost unchanged and profits go up.

That's really interesting. The idea is that you're trying to drop your bid just below that of the bidder below you which should mean your CPC drops to just above that of the bidder 2 spots below you, and hope your quality score and/or CTR keeps you positioned above both of them?

I may as well mention that my niche is not very competitive.

[LucidSW]

>> From what I understand, Google can position your ad above the ad of others who are bidding more than you if you have a superior Quality Score.

Not quite correct. You achieve a certain position because of the product of your QS and bid, not QS alone. That's the basic formula they have published. Technically, a QS of 7 and bid of $0.10 ranks the same as a QS of 10 and bid $0.07.

What you pay is determined by the ad rank of the ad below you divided by your QS. So raising your bid if you are already in first position, does not raise your cost since, assuming all else remaining equal (which it never does by the way), your cost will be the same. If you are not in first position, raising your bid raises your positioning but now you have changed the parameters. The ad below you is probably not the same and therefore the cost will be different. It may go up or down or stay the same.

As the system is very dynamic (different competition below you, bids can change often, QS changes after each search both for you and the competition), you cannot say to do one thing and expect a certain result every time. The best thing to do is try increasing QS so at least you have the upper hand and somewhat protect yourself against those simply increasing bids.

[Tonearm]

If the system raises the bid when the ad is already in the top spot (especially if it is a high volume keyword), then the system needs to be adjusted or the keyword needs to be managed manually.

So raising your bid if you are already in first position, does not raise your cost since, assuming all else remaining equal (which it never does by the way), your cost will be the same.

These comments from skibum and LucidSW seem at odds with each other. Does anyone know who's right? If raising your bid when you're already in the #1 spot can increase your CPC if you're in the #1 spot due to your quality score, I need to have my system check the average position of each keyword before the bid is increased.

you cannot say to do one thing and expect a certain result every time

Even so, I think it's worthwhile to understand how the various moving parts work. Just because you can't get a particular part to affect you in a particular way every time doesn't mean you can't use your knowledge of that part to your benefit, right?

[Andrew_Lolk]

If you are not in first position, raising your bid raises your positioning but now you have changed the parameters. The ad below you is probably not the same and therefore the cost will be different. It may go up or down or stay the same.

@Lucida

What you're saying is true except the quote above.

Let's say you're bidding $5 and have a QS of 10 (Ad Rank 50).

The advertiser below you has a QS of 7, but is bidding $6 (Ad Rank 42).

Your CPC is now roughly $5 on the dot, as it is the max you're bidding. You can never spend more, so you can't pay the famous $0.01 more than the advertiser below you.

In this case you could actually see an increase in CPC if you increase your bidding to $6. This would increase your ad rank to 60, and seeing that your maximum CPC bid has increased to $6 and the advertiser below you is bidding $6, then your actual CPC would reach $6 as well.

I hope this made sense. It's a messy subject with a lot of variants. I'm not saying anything is definite or that you would always see the scenario above, but it might be true.