When doing Pay Per Click Advertising you'll often see "Bid Gaps" emerge among cost per clicks of keywords you're bidding on. For example, top three positions for keyword "Mortgage" may be listed as:

Position # 1 $1.00 Position # 2 $.79 Position # 3 $.78 In this example advertiser in #1 position is overpaying for their traffic. They could lower their bid to $.80 and still maintain their #1 position, while saving $.20 on each click.

Why Bid Gaps Appear:

Often times advertisers in top position want to put distance between themselves and their competition to avoid having to check each day to see if they're still in #1 position. Sometimes when companies upload keywords into their Pay Per Click Advertising program they set all their bids to same amount, regardless of where their competitors have set their bids.

The most common reason why some PPC advertisers create "Bid Gaps" and overpay for their clicks is they're not aware of tools available from third party vendors, or PPC Search Engines themselves to avoid these gaps.

Eliminating "Bid Gaps":

Some Search Engines like Google automatically eliminate "Bid Gaps" by ranking ads using a combination of click through rate, and maximum bid established by advertiser. Google claims this allows them to offer advertisers best ranking on page at lowest cost, while guaranteeing ads they display are relevant to keywords users are searching on. Google's system involves some trust on part of advertiser, since it's impossible to tell what you're competitors are bidding. If your competitor has done a good job optimizing their ad copy to achieve a high click through rate, their ad could appear above yours, even if you're paying a higher cost per click.

Other Pay Per Click Search Engines like FindWhat.Com offer an optional 'AutoBid" feature. This feature allows you to specify maximum you would be willing to pay per click for each keyword, and system will automatically adjust your bid to $.01 more than next highest bidder. If your competitor raises their bid system will continue adjusting your bid until it reaches you maximum bid.

Example:

One of biggest threats to continued growth of Search Advertising is increasing plague of click fraud. Although there are varying forms of click fraud, most people define it as any click generated, and paid for, where intent is to drain advertiser’s budget. Advertisers know some clicks are more qualified than others, and not every visitor from their PPC campaigns will convert to a customer. But, they have a right to expect that traffic they are paying for is coming from people at least marginally interested in their products or services.

What Motivates Click Fraud?

Why does click fraud exist? What motivates people to deceive system by sending PPC advertisers bogus traffic? The short answer (as usual) is money.

Many Pay Per Click Advertising networks are partially, (or in some cases totally), dependent on affiliate sites to generate traffic for their advertisers. These networks syndicate their customer’s ads so they will appear on sites of their affiliates. Every time someone clicks on an ad PPC Network and affiliate site share revenue. The more clicks affiliate site generates, more money it makes. While vast majority of affiliates are legitimate trustworthy sites, others are in business of exploiting loopholes in system to line their pockets with real money by generating fake clicks. Often times weapon of choice used by these rogue sites to cheat system is a software script that automatically clicks on PPC ads.

Another variation of click fraud uses a more personal touch to steal advertiser’s money. In hyper-competitive world of Pay Per Click Advertising battle for premium positioning at an affordable cost can cause companies to use less than ethical techniques to gain an edge. Companies can drive up their competitor’s marketing costs by clicking on their Pay Per Click ads. If their competitor’s marketing costs get too high they may lower bids on their keywords, or stop bidding on word altogether. Either way, cost for word goes down, giving fraudulent company an opportunity to increase their ranking on page at a lower cost.

The Search Engine’s Response To Click Fraud.