Tonight the Inside AdWords blog announced that Google is going to change the ad placement algorithm, replacing actual CPC as a factor with maximum CPC.
How does this affect advertisers? Well, by Google’s estimation, this is a GOOD thing for advertisers:
Actual CPC is determined, in part, by the bidding behavior of the advertisers below you. This means that your ad’s chance of being promoted to a top spot could be constrained by a factor you cannot influence. By considering your ad’s maximum CPC, a value you set, you will have more control over achieving top ad placement.
In addition to increasing control for advertisers, the improved formula increases the quality of our top ads for users. This is due to more high quality ads becoming eligible for top placement, thereby allowing our system to choose from a larger pool of high quality ads to show our users.