Google AdWords - eleven herbs and spices revealed • The Register

alexbosworth:

This is an interesting article on Adwords. It argues that AdWords bids, which are supposedly only used to help control position rank - actually also control impression share.

That is to say, if you are the #2 ad, not only are you shown below the #1 ad, your ad actually appears less often - google will artifically shrink the listed competitors to reward the #1 ad.

The reason I think they do this and that this is likely to be true, is that it’s often not in your best interest to be the #1 ad, as the cost to get there will outweigh the reward for being there.