Expalining Google AdWords bidding

Image by Getty Images via Daylife

First, very surprising fact : Approximately 25% of searches on commercially interesting query terms result in an ad click!

As natural step in explaining advertising techniques - AdWords come as natural step.
AdWords are for professionals with money to spend on them. Just like every other advertising platform out there. But, every CEO guru have problems on placing its bids in top bid results, since they expect to thing go straight forward. Place as much money you can on words you want to bid and you will appear in ads result for keywords you bid. That wrong approach. Thats one of resons Yahoos Panama project never made any success.
Lets start, why are people compaining:
-Just because one can upload a file and call it a website does not make it a GOOD website.
-Just because someone can fill out a form, tag a credit card, compose a few lines of text and submit a bid does not make their work a GOOD advertisement.

And a BAD ad that links to a BAD website is not good for Google, so your BAD ad, regardless of how much you are willing to pay, will ALWAYS be shown lower in the results, if it is shown at all. It's up to you to write better ad copy and provide a better website for that ad to link to, if you want your "quality score" to improve. That takes diligence, education and money, just like every other advertising program on the planet.
From all existing search engines, Google's is the ONLY one that makes any kind of sense for everyone concerned. Through learning how to write better ad copy and learning how to provide a more credible experience to those who have clicked on yours ads and I pay less for them. And make no mistake ... it's an ongoing process. If you are not deeply involved with maintaining your "quality", you WILL lose positions.
After all, if it were the kind of rudimentary auction that you are capable of understanding, then simply paying more would result in a better position ... but it baffles you that there is a more complex algorithm in play.
Fancy that ... Google has a deeper understanding and interest in the relevance of the content they show to their website's visitors than you do.
Stop your whining about things you don't understand.
Even, though Google bidding algorithm has been added human attributes : evel, bad ... its not static. Its changing all the time. For example :
A little less than a year ago, Google jacked the system. It used to be that, for the most part, when multiple keywords in your account match the query, the one that most closely matched the query (by number of characters) would be put in to auction. Google changed that so the keyword with the highest rank would go in to auction instead. So, if you bid $10 on 'spyware' and $1 on 'spyware software', and some types 'best spyware software' (exact matches are supposed to work as expected), given quality scores are roughly the same, the ad with the highest rank (most likely spyware) will go to auction. Even though you explicitly wanted to pay less for those terms, Google bilked you in to paying more!
There are many other terms related to this algorithm, but as soon as I reveal them - you will be first to know.