This list made it seem like bidding higher makes all clicks more expensive. Would bidding $.375 CPC not also get you those 500 clicks @ $.25 CPC that you were getting before?
I was under the impression that your bid is the highest you are willing to pay, so you should bid up to your earnings per click.
Unless there was nobody bidding more than you, or nobody whose (bid * quality score) was better than yours, you won't get those 500 clicks at $0.25 anymore. Your ad will now appear higher than some other ad it appeared below in searches, and you'll pay what it costs to outbid that other advertiser. Increasing your bid almost always results in increasing your average CPC.
If you are bidding on searches where there's no competition, bidding more almost always means paying more for no benefit, too. I have bids on my searches related to my sites' brand names, which nobody else advertises on. When I set a CPC of $1 per click, Google would charge me something like $0.65 per click. When I dropped the bid to $0.50, they'd charge me $0.35 for the same clicks on the same placement. If I bid too little, they won't show the ad at all.
500 clicks * 5% CR * $10 Conversion Value – 500 clicks * $.25 CPC = 125.00
750 clicks * 5% CR * $10 Conversion Value – 750 clicks * $.375 CPC = 93.75
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This list made it seem like bidding higher makes all clicks more expensive. Would bidding $.375 CPC not also get you those 500 clicks @ $.25 CPC that you were getting before?
I was under the impression that your bid is the highest you are willing to pay, so you should bid up to your earnings per click.