Let’s assume a marketer plans on supplementing a poor Quality Score with an unrealistically high maximum Cost per Click (CPC) price. That person must prepare to have his/her bluff called. Instead of measuring cost per click, Google will measure the MAXIMUM bid price. So, average cost per click could potentially increase dramatically. This apparently will only affect the ads positioned above organic results…at least for now.

Who Wins?

• Big budget marketers who will own paid impressions—Look for a flattening of the paid search marketplace, as the big boys scrap it out at positions 1–3.
• Yahoo, MSN, Ask & Shopping Engines—Despite a much lower market share in the search space, these media are going to become much more affordable. I also wouldn’t be surprised if it changes the search landscape, making Google a more big-brand option and Yahoo, MSN & Ask catering to more small business.
• Top Organic Placements—A Top 10 ranking will be more important than ever. Especially when value is determined by paid search cost equivalents.
• Search Engine Optimizers—If you’ve read that SEO is dead, Adwords just brought it back to life. See above.

Who Loses?

• Marketers with smaller budgets—They will have a more difficult time competing for top position, and will find much lower click-through rates as their creatives are moved to positions 4+. Look for an increased respect for the long tail, and gravitation to other search engines.
• Ad Agencies on performance-based agreements—Many advertising agencies and SEM shops charge clients a flat rate for a certain amount of leads/conversions each month. Expect those to be renegotiated…quickly. IMO, even branded terms are not exempt from modification depending on their level of competition.

Since Google’s revenue only grew 58% last quarter, this might give them an added boost. Let’s not forget that they dropped AdSense on several arbitrage sites in June/July. This move will help them make up for that lost revenue.

Hat tip to Rick Farago and Jon Revill.