Understanding CTR, CPC and Actual cost

Discussion in 'Google AdWords' started by griffen, Jan 27, 2006.

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  1. #1
    I was looking through a thread on webmasterworld in an attempt to understand the link between CTR, CPC and actual cost.

    http://www.webmasterworld.com/forum81/6073.htm

    Are the following formula's valid for roughly understanding how each of the variables effects your ranking:

    Ranking Number = CTR * Max CPC
    Actual Cost per click = (Max. CPC + 0.01) / CTR

    Then if your ranking number is 1 then all calculations are done in relation to the competitor who is number 2.

    Is this roughly how it's done?
    Does anyone have a better method of cacluating the relation between the various variables?

    Thanks
     
    griffen, Jan 27, 2006 IP