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Today, we'd like to revisit a common misconception, about which we receive quite a few questions. In the first part of the post, we will very briefly cover the most important facts and in the second we'll take a more detailed look at four related questions.

The common misconception: Many advertisers believe that if they have no competitors for a keyword, their minimum cost-per-click (CPC) will automatically be lowered by the AdWords system to $0.01, the lowest possible CPC.

How it actually works: The minimum CPC for a keyword is not related to the number of competitors one has that keyword. Instead, minimum CPC is dependent on the Quality Score of the keyword, as it's used in the advertiser's account. This functionality was introduced in August 2005, when keyword bidding evolved to a quality-based model.

Are there really no competitors?
If you look for your ad and see no competitors, this does not necessarily mean that there are no others advertising on that keyword. For example, many advertisers choose to show their ads only during particular times of the day, so you will not necessarily see them when your ad appears. Or, while you might be targeting the entire United States, competing advertisers may be regionally targeting and not including the area in which you are located -- in which case you'll not see their ads.

Why doesn't Google show ads for every keyword?
We are often asked if we wouldn't prefer to make additional revenue, rather than allowing keywords for which no ads appear. In point of fact, Google would prefer to show no ads for a user's search query, rather than to show ads which provide a poor quality experience for users who click on them -- and which might damage long-term user trust in the the quality of information delivered by AdWords ads.

How do I lower my minimum CPC?
To achieve the lowest possible minimum CPC, make sure your keywords, ads, and landing pages provide an excellent user experience for those who search for those keywords, click on your ads, and visit your site. There is a great deal of useful information to help you reach this goal in the Ads Quality and Performance section of the AdWords Help Center -- so much so that we've heard advertisers say it takes a fair amount of time to read and absorb it. However, for those who truly wish to improve their Quality Score, improve the experience of potential customers who click on their ads and visit their sites -- and lower their Minimum CPCs -- this is likely to be time well spent.

Should I search for my ad on Google.com to see who my competitors are?
If you are an advertiser who searches for your own ad to judge the competitive landscape, we recommend using the Ad Preview Tool, rather than searching for your ad on Google.com. Using this tool, you'll see your ad (and the ads of your competitors which are showing in the moment you check) as they actually appear on Google.com -- but you won't accrue an impression. Please take a look at this very straightforward tool here, and try a sample search. You may even want to bookmark the page.

Posted by Blake, Inside AdWords crew