How does this work - I have a default CPC of 0.10 for a keyword. Google shows my ad for 0.05 but my average position is 6. I would expect Google to take the full 0.10 not just 0.05 and move me up further in the list. Even if the other 5 ads were > 0.10 I would think the ad would cost 0.10. Anyone have an insight into this?
you probably have the default setting of your max cpc = $0.10 - go to your campaign settings and change the configuration to it consider the average cpc=$0.10 not the max. This may improve your position in some cases.
I really don't think is something wrong using the default settings in AdWords - excepting to the delivery more that you should use accelerate mode to obtain more trafic, you should use the default settings for your campaign.
I feel that the max cpc is what Google considers, but then if you want Google to take $0.10 try $0.12 or $0.15 sometimes that works... May be your competitor for that position is paying lower than you.
If $0.10 was your maximum bid, it's quite possible that it only spends $0.05 per click. My blog on how Google calculates your position using the QS (http://www.epiphanysolutions.co.uk/...our-adverts-position-and-why-it-matters.html). In summary, it works out where your advert should appear, based on your maximum bid and QS, then charges you the minimum to appear there. Spending $0.10 wouldn't get you any higher in the search results, so Google doesn't charge you that much...
If you're referring to the "Optimize" default setting for split testing your ads, you are correct... I agree. I explain why here: http://forums.digitalpoint.com/showthread.php?t=331212