Originally Posted by 2HousePlague

Whose estimate?

Exactly.

If they exaggerate projected clicks, two things happen: you budget more money and/or you drop your per-click bid to keep within a daily budget.

Let's assume a small (naive and inexperienced) advertiser does both these things. The first thing he notices is the tiny number of clicks (under-projected page views notwithstanding). So what's he gonna do but up his bid, never thinking that a CTR of 1.8% probably has more to do with his creatives and relevancy than with position. But Google doesn't give a shit about CTR -- unless you drop so low that you stop providing them with revenue, and displace somebody else's revenue-generating ad.

I have seen this phenomenon hundreds of times. Adwords inflates traffic projections because it makes advertisers throw MORE money at high-CTR/high-pageview terms, which distracts them from optimizing for ROI.


j-