I am confused about the AdWords Ad Diagnostic Tool and its relation to average position. Next to each keyword, scrolling over the magnifying glass gives you a message of "This keyword is OK" or "Your ad is not showing on the first page". This I understand. However, I can't correlate this with avg. position. I get the "not showing" message for some keywords with an avg. position of around 3, and the "OK" message for some keywords with an avg. position of over 6. Shouldn't these be correlated? Which "measurement" is more accurate? Thanks for any advice...
I don't know if this is your problem, but it could be contributing to your confusion. Some searches will display pay per click ads above the organic search. You will usually see 2-3 ads displayed in this area. This means if there were 3 PPC ads displayed above the organic results then the first ad displayed on the right will be ad position #4. So having position #9 will mean your PPC ad is sometimes displayed on the first page and other times it will be on the second page depending on whether ads are displayed above the organic results.
Google calculates ad rank for a particular keyword every time that keyword is used for a search. This means that your ad's placement for a particular keyword can fluctuate quite dramatically if: 1) your quality score isn't that great 2) there are a lot of advertisers competitively bidding on the keyword 3) the keyword is a broad or a phrase match I would rest assured that your average position for a particular keyword is exactly that - the average position in which it appears per search query.