Google, one more step removed from what it was.

To gain a top spot at Google (above the search results), you had to have a minimum quality score. Then, if your bid was high enough, you could be eligible for a top spot. While occasionally frustrating, it stuck to the core Google principle that Quality was the driver.

A Change, mentioned in more detail below, now moves the metric for being in the top spot to a minimum ranking derived from a max bid. The shift is essentially this:

Your rank was derived from your bid and quality score. Your actual CPC was based on the amount you would have to pay to keep your rank just above the next lowest ranked ad. So, as long as your rank is above the next ad down, your actual cost could be less. If you are the top ranked ad, you can bid even more, but your actual CPC should not increase unless another advertiser increases the bid or quality if their ad, thereby causing your ad CPC to go up. If they go high enough, they pass you in the ranking, and your CPC is driven by the next lowest ranked ad.
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In the example (demonstration only, not actual criteria), even though you bid $2.50, your actual cost is only $1.73, the amount needed to keep your rank just above the 2nd ranked ad. The actual CPC is even less than the next three advertisers.
 

Now, that is changing for the top spots. While you will never pay more than your max bid, Google is positioning the CPC calculation to charge you (potentially) significantly more, while justifying it by moving you from the first ad on the right side to the first ad, but on top.

They have a minimum CPC amount to make this happen, but it must be tied to a ranking score. So, now instead of insisting that an ad quality improve before moving to the top, Google is saying just stay where you are. They’ll set a minimum rank and if your ad can achieve that rank at a CPC rate somewhere less than your max bid, they’ll move you and charge you the CPC for a top spot.

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So, in the example, instead of paying $1.73 CPC, they’ll use your quality score, divide it into the minimum ranking (1.75 in this example), and calculate the needed CPC to achieve the ranking. If it is less than your bid, your CPC moves from $1.73 to $2.30 (in this example) and you get moved from the right side to the top of the page.

So, the take away, watch your effective CPC. We do not know the true ranking, or min CPC to achieve the top spot. For some folks this may well be worth the premium to move from top right to top page. For others, you’ll need to adjust bids and work on quality (a never ending challenge anyway).

I suspect that there were two drivers to this: 1) Advertisers’ frustration at not being able to move, and 2) a revenue enhancement opportunity. It is just somewhat disappointing that Google, though stating that it has to be a high quality ad, is compromising on this principle and allowing us to buy our way to the top. That’s capitalism, I guess.

Thanks Tim & Jen for showing this to me...