Google Adwords works differently than most of the other PPC search engines such as Yahoo, Miva(US) etc. Typically, you can not really control the position of your AdWords listing and when it will be shown because the position is not only depended on the amount of money you are willing to pay per click. Your ad's position is also determined by many factors, the most important factors are: your daily cap, maximum cost-per-click(MaxCPC), your ad's actual click through rate(CTR) and your average position.
You can not directly control your ad's actual click through rate and position, so that in order to manage your keywords on Google AdWords is a big challenge and consume a great deal of time. If you do not manage your keyword bids properly, you will waste a lot on your advertising money on Google Adwords.

We have developed an intelligent bidding formula in Dynamic Bid Maximizer that allows you to control what position you want to bid and when it will be shown. By using Dynamic Bid Maximizer, you will save up to 80% of the advertising cost on Google Adwords and increase your ROI. It will also save you a lot of time compared to managing your keywords manually.

Here is a screenshot of the Dynamic Bid Maximizer interface for Google AdWords:

The bidding formula for Google AdWords is very complicated. Basically, Dynamic Bid Maximizer will control your position by increasing and decreasing the bid amount according to the bidding formula below:

MaxCPC = (Current position - Desired position) x Preserved Bid Value

For example if your desired position is "1" and current position is "5" and the preserved Bid Value is 2 cents, then the program will increase your bid by 8 cents in order to obtain the desired position in this situation. After the bid increased, the program will check what position you currently in and change the bids according to the new keyword lookup results until either you have reached the desired position or the upper limit. However, during certain times, your current position may be above your desired position, in this case, the Dynamic Bid Maximizer will lower your MaxCPC amount to save you money while maintaining your current position.

Step by step of Dynamic Bid Maximizer bidding process for Google AdWords:

Step 1. Check your current position in relationship to your desired position, if your current position is equal to the desired position, do nothing, otherwise go to step 2.

Step 2. Your site is currently not displaying, this means your ad is not in the search results that currently shown by Google for this particular keyword. In this situation Dynamic Bid Maximizer will increase your bid by the "Preserved bid value" until your ad are shown or you have reached your upper limit.

Step 3. If your desired position is lower than the positions that are showing, then the program will attempt to bid you to the last position that is showing for that particular keyword by utilizing the steps described in step 2 providing that the bid did not exceed the upper limit.

Step 4. If your ad is already showing but still different than the desired position, then the bidding formula described previously will be applied to calculate the bid changes.

Step 5. Because your position is also depended on your CTR, at certain time, even you do not increase your MaxCPC, Google AdWords may raise your position automatically base on your CTR, so that your current position may be higher than your desired position. In this situation Dynamic Bid Maximizer will decrease your MaxCPC to save your money while maintaining your desired position.

To summarize Google's bidding algorithm, Dynamic Bid Maximizer will attempt to make your ad show first under any circumstance providing that it did not exceed your upper limit setting, then it will apply the bidding formula described above. The important point to remember here is that your position is determined by more than just your bidding price. You may be paying more than the ad that ranks above yours and still showing at a lower position. Conversely it can also be true that you will be showing at a higher positions with a lower bidding price than the people who are under you.