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Actual CPC Calculation - beyond the basics

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# 1
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Of course, I have read all the official Google support documentation on this topic.  But I'm seeing pricing behavior that doesn't jive with the support docs.  I am advertising in a highly competitive vertical with a high volume campaign.  While I can't see competitor campaign data, there are enough competitors that I can be confident with a few assumptions. 

 

I often see something like this in a single day within a single ad group. . . 

 

Keyword, Bid, QS, Actual CPC

"red yellow blue green", $.25, 8, $.01

"yellow blue", $.25, 8, $.24

 

Assumptions: 

1. A number of competitors are also bidding on "yellow blue". 

2. Competitors are bidding higher than $.01 on "yellow blue". 

 

I realize that Ad Rank is no longer calculated with the old (bid * QS) formula.  Now the support docs just say that a lot of stuff is considered.  Not helpful.  Knowing that competitors have almost identical business models as my client, I'm having a difficult time believing that there wasn't another advertiser in the auction for "red yellow blue green" with similar QS willing to pay a significantly higher rate than $.01.  There are certainly competitors bidding higher than $.01 on something that matches to "yellow blue", as indicated by my actual CPC for that keyword.  We're all clearly copying each other's ad text and ad extensions when testing, so all ads are starting to look the same.  

 

How in the world am I getting a click for $.01?  

 

I am seeing this behavior far too often to ignore it.  It's as if we're not buying in an auction anymore.  I have also run a number of tests where I have repeatedly shown that dramatically increasing bids will lower my actual CPC.  When I start pulling bids down to gain more control, CPCs go back up.  I was writing this off as Google inaccurately weighting CTR at different positions and giving my ads undeserved rewards for top positions when I bid up.  But after repeating this behavior a half dozen times on high volume ad groups, that easy answer isn't satisfying me anymore. 

 

I am making this post to encourage Google to provide more explanation of how clicks are being priced.  Or to possibly get some better theories from people smarter than me.  How is actual CPC calculated?  

 

1 Expert replyverified_user
Marked as Best Answer.
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Accepted by Mini-CM (Community Manager)
December 2015

Re: Actual CPC Calculation - beyond the basics

Top Contributor
# 2
Top Contributor
Other than how much Google are charging there is another side to this - and that is which clicks you are buying - let me explain....

Try looking through the dimensions tab and seeing where your ads are appearing - and when. Google will serve your ads when and where they can within your budgetary limitations.

So, let's suppose that at 3pm in New York, they simply cannot serve your ads given your bids. But they might be able to serve them at 3am in Idaho.... I know that's unlikely to be your specifics, but you get the point. Also look to see which ad position you are getting in these ads - again, it's not the same getting an ad in position 1 or 2 compared with one in position 8 or 9....

I know this is basic stuff, and you've probably looked at this already, but we need to be sure we are comparing apples to apples. More segmentation is going to be required for you to get a clearer picture of what's going on.

Re: Actual CPC Calculation - beyond the basics

Visitor ✭ ✭ ✭
# 3
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Yes, I've isolated time of day, geo, device, and pretty much every other dimension I have control over. I've even turned search partners off to take that out of the mix. I know they discount low quality clicks coming from search partners sometimes, but I don't think this happens on Google proper. My last observed $.01 click was at position 1.0. It occurred Friday afternoon in my time zone. But keep throwing rocks! I might be overlooking something.