paying high cpc for low ad position
In an experiment, i was able to see that for a particular niche, the ad position 1 advertiser is paying around 1$ per click and the 2nd position advertiser is paying 2$ per click, now since the 2nd advertiser is paying more then why his ad position is on 2nd number?
Re: paying high cpc for low ad position
It is because of the Ad Rank formula MaxBid x QS. The advertiser who pays more but ends up on position 2 needs to increase the relevancy of his/her Ad texts.
Learn about how the auction works from this video :
The situation described by you is explained at minute 5 second 26