If you are the businessman, paying out the cash yourself, risking everything, with your charge card being drawn on each month to pay for all those clicks, you won't waste time with self-importance. Your customers don't want to mess with it either. The place that tells this tale the best is with your AdWords management. When you are the one risking it all, what gets clicks and what doesn't is a very fascinating topic.

Relevance Equals A Google Reward

If you bid higher for clicks you can get a higher position on the search pages. However, as your click-through-rate increases, Google will reward you by giving you a better position on the search pages. That is to say they reward you for relevance.

Roughly speaking, the first position has always been given to the highest bidder. But Google has long maintained an ingenious little twist. Here's a simplified version of its formula:

Your Relative Position = Your Bid Price x Your Clickthrough Rate

The more precise explanation of the equation is: your bid price x you Quality Score. But whichever one you use, your click-through-rate makes the biggest impact, besides your bid price.

Next question: Which CTR are we talking about? We are not talking about, the total ad group CTR, nor the CTR of any of your ads either in the search partners or in adsense. We are talking about the Click-Through-Rate of the individual keywords, their performance on Google alone.

If you are getting a good CTR, you won't be required to have as high a bid for a good position. It works like this; I bid one dollar and the ad gets a click through rate of one percent, and your ad gets a click through rate of two percent. You will be able to get about the same position as I do with only a bid of 50 cents. With a 51 cent bid you will get a higher position than I have. Say you already have top position, Google will charge you a lower bid price as your click through rate improves, without you having to do anything. Nice!

Even though this may seem magical, it isn't. It does mean you are shelling out less money each month to Google and that means more money heading to your bank account.