« How does cost-per-click work on the Display Network? »
Google Ads uses an ‘auction system’ to decide which ads to show and in what order. The ad auction for the Search Network and Display Network are quite similar except for one key difference — INCREMENTAL CLICKS.
But first… keep in mind that your ‘Max Cost-Per-Click’ is NOT what you actually pay for a click. You will pay what’s required to rank higher than the ad position that’s directly below you.
Now back to INCREMENTAL CLICKS…
On the Display Network what matters most is “viewable ads”. Therefore, you will pay what’s required to rank higher than the ad below you, but only for incremental clicks.
A particular web page has 2 ad positions to fill. Let’s assume your ad might receive 7 clicks if it shows in the most visible top position, but only 4 clicks when it appears in the second ad position.
The 3 additional clicks are called INCREMENTAL CLICKS because they allowed your ad to continue showing in the top position.
So… for those 3 ‹incremental clicks› you will pay what’s required to rank above the other ad. But for the remaining 4 clicks you will pay a lower price — the cost if your ad had actually appeared in the lower position.
Stated another way: Even though your ad was clicked 7 times for being in the top position, you only paid “full price” for 3 of those incremental clicks.