Jim has created a Google Search ad with a bid of $5. Two other advertisers in an auction have bids of $2.50 and $2. How much would Jim pay for the first spot in the auction?

Analysis of Correct Answer(s)

This question tests your understanding of how Actual CPC (Cost-Per-Click) is calculated in a Google Ads auction. The amount an advertiser pays is not their maximum bid, but the minimum amount needed to hold their ad position.

• The formula is based on beating the Ad Rank of the advertiser directly below you.
• In this simplified scenario (where Quality Score isn't mentioned, so we assume it's equal for all), the calculation is straightforward: you pay $0.01 more than the maximum bid of the advertiser in the position just below yours.
• Jim is in the first spot. The advertiser in the second spot has a bid of $2.50.
• Therefore, Jim's Actual CPC would be: $2.50 + $0.01 = $2.51.

Analysis of Incorrect Options

• 5: This is Jim's maximum bid, not the actual price he pays. The auction system rewards advertisers by only charging them what's necessary to win the spot.
• 2.5: This is the bid of the second-place advertiser. To outrank them, Jim must pay slightly more, not the exact same amount.
• 4.5: This figure is an arbitrary distractor and is not derived from the standard auction pricing model.