Actual versus Maximum CPC

What is the difference between the actual CPC and the maximum CPC per bid? Knowing the answer can help corner that top position on Adwords and explode your traffic.

Every Adwords advertisers knows what the maximum CPC bid is. This is price you give Adwords as the absolute most you're willing to pay for a click.

The actual CPC is what you pay. These two numbers are almost never them same. You will almost always pay less in the actual CPC. The actual CPC is the cost to raise your ad above the next advertiser, based in part on your quality score.

For example, let's say your maximum CPC bid of $0.25 would get you the 3rd ad position. Adwords will charge you just what it costs to beat the 4th ad. This could be $0.10, $0.20 or the full $0.25.

This is known as a Vickrey Auction.

Another important point is that prior to 2007 Adwords based your ads position on the combination of the actual CPC and quality score. Since 2007, Google changed to base the position on the maximum CPC bid and the quality score.

The quality score component of this formula is closely related to your CTR. The better a CTR/ quality score, the cheaper it is for you to achieve top positions. For example, an ad with a 2% CTR and $0.25 max CPC bid is the same as an ad with a 1% CTR and a max $0.50 bid. If both bid $0.50, the ad with higher CTR wins.

You can use this to your advantage. You can set your maximum CPC bid much higher than you really want to pay. You know that the actual cost will be less. Plus, you can be assured of a higher ad position because Google will base the ad position on this inflated maximum CPC.

You could theoretically bid $100 per click. This would guarantee you the top ad position, because Google will base the ad position on the high bid. You would know that your actual CPC would be nowhere near $100, but instead just enough to beat out the second ad. A keyword with no competition would cost $0.05 or $0.10 assuming you had a good quality score.

Assuming you have a good CTR rate of 1% or better, it would impossible for any other advertiser to take the top position from you. Since google bases the top position on the maximum CPC, and you are at $100 per click with a good quality score and CTR, you would be unbeatable.

But there are some risks with inflating the maximum CPC. A competing advertiser could increase is maximum CPC. You would still have the top position, but it would more expensive to beat the number 2 ad. It's quite possible for the actual CPC to go beyond your budget or comfort level. You would need to be very vigilant to make sure you do not cross this threshold.


Are you over paying for your Adwords campaigns? Have you experienced any of the following problems using Google Adwords?

•   High cost to maintain your Adwords campaign
•   Poor quality score affecting your bids
•   Low Click Through Rate for your ads
•   Minimum bid for your keywords is too high
•   Landing pages that don't convert

There is a solution to all of these problems. Slash your Adwords costs in half and get more traffic with the free Adwords Strategy Guide. Get your free copy now.

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