One factor the Google Ads system uses to calculate an ad’s actual cost-per-click (CPC) is the:
- Maximum CPC bid of the ad showing one position lower on the page.
- location targeting of the ad showing one position lower on the page.
- cost-per-thousand impressions (CPM) of the ad showing one position lower on the page.
- Ad Rank of the ad showing one position lower on the page.
The correct Answer is: maximum CPC bid of the ad showing one position lower on the page.
Explanation: Theone factor the Google Ads system uses to calculate an ad’s actual cost-per-click (CPC) is, maximum CPC bid of the ad showing one position lower on the page /Actual cost-per-click (CPC) of the ad showing one position lower on the page.
If the advertiser immediately below you bids US$2.00, and if that advertiser’s ad is the same quality as yours (and has equal-performing extensions and ad formats), you’d typically need to bid a penny more than US$2.00 to rank higher than that advertiser and still maintain your position and ad formats. With Google Ads, that’s the most you’ll pay (about US$2.01), whether your bid is US$3.00, US$5.00, or more.
Read more here: https://support.google.com/partners/answer/6297
