Ad Position refers to where exactly your ad shows up in the search results. Generally speaking, in Google there are usually three ads above the organic results, (ad positions 1-3), and then 6 ads or so along the right sidebar (positions 4-10). As you go to additional pages in the search results, you may see different ads (positions 11+).
Ad position is calculated for each query based on the auction system we discussed earlier. As a result, the “average position” metric in both Google and MSN is the average of all of the instances ads have shown up for a particular keyword.
Ad Position is a tool. Some ad positions perform better than others. Are you noticing your ad is not receiving many impressions or is receiving a lot of impressions but not receiving any clicks? Check its position – if it has a low position (4+), it’s position may be the reason why. As with organic results, users are most likely to click on ads in positions 1-3. If your ad is in a lower position, its poor performance may be due to its ad position. Increasing the keyword bid should increase the position of the ad, which will likely increase its performance.
Sometimes advertisers will find that an ad performs better in a lower position (e.g. position 4 does better than position 1). Other times advertisers will not want to pay what is sometimes a premium to be in position 1, especially for a competitive term, and it is unlikely an advertiser will ever be in position 1 for a brand keyword that is not their own. Regardless of how you use it, it is important to be aware of the position of your ad. Figure out what ad positions work best for your company, and have a goal to stay there.