The Changing Algorithm Behind Google’s Adwords

Google claims that the cost of advertising (CPC) using Adwords is a fixed calculation from when they

“combine the components of Quality Score, the max. CPC bid, and the expected impact of extensions and other ad formats to determine Ad Rank.”

Then as an advertiser your bid and subsequent placement is based on the results of that auction (Ad Rank).

However, over the last few years it has become clear that there is more at play than that. If we can assume that the impacts for quality score and competition  (the number of advertisers for that keyword) remains the same, then we can only assume that the final cost calculation is what is changing. If more advertisers are bidding, there is an increased competition, and the average CPC should rise or fall within a similar ratio.