It went live on our accounts yesterday (16th September), and after poking around a bit, I saw no real changes in the performance of our campaigns. We haven’t changed our bids, our competitors haven’t, and any changes to the Quality Score have been small. So, everything looks fine…

I ran a quick report this morning, and saw that the average positions, and average cost-per-clicks were pretty much the same as they were before the update. Nothing to worry about, then…

Well, actually, yes there is. I’m very concerned (hence all the sentences that end with an ellipsis)…

There is only room on the first page of the search results for 8-10 adverts, and most keywords have more adverts than that now. But what Google are now telling advertisers (particularly those advertising in 11th – 13th) is that for a few pence more, they can appear on page one, and get a lot more traffic. Suppose that your average position is 11th, and you are paying £0.50 per click. Google informs you that if you pay £0.55 per click, you’ll be getting a lot more traffic, as you’ll be on page one.

There’s a good chance that many advertisers will increase their bids. Only problem is, there’s still only 8-10 adverts on the first page of the search results, so some adverts will fall off the first page. They’ll see their traffic volumes fall away, and be left with the same dilemma. Stay on page two, or increase their bids to £0.60.

The result is that over time, the cost per click will gradually increase, unless advertisers ‘do the sums’ and work out their optimum bids and stick to them. In effect Google is encouraging sensible advertisers to over-bid, and become ‘numpties’ – see my numpty blog for more details on this: http://www.adwordsprofessional.com/102000-ppc-how-the-numpties-are-ruining-it-for-everyone.html.

In the long run, people will either ignore the new statistic (in which case Google have replaced a useful statistic with a worthless one) or they’ll increase their bids accordingly.

Bad news for them, and bad news for everyone else as well – the cost per click is only going to go up for everyone, wherever they appear in the search results.

At the moment, the effect should be limited, as the number is quite well-hidden. But if the number appears more prominently in the future, it’s going to hurt…

The end of the Universe? Ok – that may be an exaggeration, but for many Adwords advertisers, it may be the end of the road. And Google? They’ll make more money from having less advertisers making higher bids, without really changing their system.