Previously in the top ad placement formula, your Quality Score and your actual CPC, which is determined in part by the bids of advertisers below you, where considered to determine where you should appear. Even if you have a high quality ad, if advertisers below you are not bidding very much, your actual CPC may not be high enough to qualify your ad to appear in a top position.
Your actual CPC will continue to be determined by the auction, but subject to a minimum price for top spots. You have to achieve a threshold set by Google to get promoted to the box – previously this was calculated by your (QS * Actual CPC). As the actual CPC is partly determined by the bid of the advertiser below, in some cases you were held back from promotion by a low bid from the ad below. The calculation for promotion is now (QS * Max CPC), if this exceeds the threshold then you jump to the box, and your actual CPCs would be unaffected.
This model appears to be now in use, with a lot of changes taking place in the PPC market, most notably money supermarket dropping form first position on the term “car insurance” for the first time in months.
Is this actually google trying to help us out? Yeah right. It is just another way for them to bump up the CPCs paid by the top advertisers and increase their revenues. Think about it, top position is now determined by the people who have the highest ceiling CPCs! By applying the new formula advertisers trying to achieve this position will end up paying their maximium and we are back into the old basic auction model.
Google are basically saying, “Tell us how much you want top spot!” and then ultimately making you pay it.
If you have PPC ads knocking around top position for high volume terms, Id keep an eye on my CPC if I were you!