An upcoming change in the Google AdWords algorithm will consider a keyword’s maximum CPC rather than the average CPC to determine whether the ad triggered by that keyword will be placed on top of the organic results or in the right-hand column on the search results page.
An announcement on the Inside AdWords blog stated that the change is likely to be rolled out in the next few weeks.
Previously, some ads could never make it to the top position, above the organic results because the actual CPC was too low. The actual CPC is not fully within the control of the advertisers, as it works on the auction system and depends on how much the other advertisers are bidding.
The new formula removes this dependance on other advertisers’ bids when determining whether or not an ad can be features in the top ad slots. However, the actual CPC value will continue to be calculated in the older fashion, using the bid values of all other advertisers.
AdWords Quality Score will continue to be an important metric in the calculations for both the top ad placement determination as well as actual CPC calculations.
It is worth noting, that the greatest beneficiary of this change will be none other than Google themselves, as advertisers can now use sheer paying power to muscle their way to the top