New Change to Adwords Announced
Google has announced a significant change to way in which they determine placement of advertising. While Quality Score remains the major determining factor in topping the list of paid advertising, Google has changed the formula which the company says will offer advertisers "more control over achieving top placement while increasing the quality of our ad results for users."
Essentially Google is changing the way it looks at price. The current formula considers an ad's Quality Score and cost-per-click (CPC). The new formular however will consider an advertisement's maximum CPC, but still heavily weight Quality Score.
With this new formula, instead of considering your actual CPC, we'll consider your maximum CPC bid, which you control. This means that your ad's eligibility to be promoted is no longer dependent on the bids of advertisers below you. Therefore, if you have a high quality ad, you now have more control to achieve a top position by increasing your maximum CPC.
Your actual CPC will continue to be determined by the auction, but subject to a minimum price for top spots. The minimum price is based on the quality of your ad and is the minimum amount required for your ad to achieve top placement above Google search results. As always, the higher your ad’s quality, the less you will pay. And you will never be charged more than your maximum CPC bid.
Google anticipates that most ads will continue to perform as they have in the past, but you may see ads shown in higher spots (which means more clicks). Google advises that if you do not want your ads to appear above the natural search results, check that the maximum CPC's are not dramatically higher than the actual CPC's you normally pay.