If you bid $2 for a click and the next highest bid is $1.25, how much will you pay?
Correct Answer
$1.26
Why is this the correct answer?
If you bid $2 for a click and the next highest bid is $1.25, you will pay $1.26. Google Ads uses a second-price auction system where you only pay one cent more than the next highest competitor's bid to maintain your position. So if the next competing bid is $1.25, you pay $1.25 + $0.01 = $1.26 — well below your maximum bid of $2.00. This system ensures advertisers pay a fair market rate rather than always their maximum bid, rewarding competitive bidding without penalising it.
Why are the other options incorrect?
$1.24
$1.24 would be less than the next competitor's bid of $1.25 — this would mean you were paying less than what is required to maintain your position above them, which is not how the auction works.
Real-World Example
An advertiser sets a max CPC of $5.00 for the keyword running shoes. The next highest competitor bids $2.40. Using Google's second-price auction, the advertiser pays $2.41 per click — 52% less than their maximum bid — while still winning the auction and maintaining the top position.