“Aside from that, I disagree with you on several other points:”
…Your prerogative – always appreciate readers getting involved.

“Presumably your “CTR” column represents clicks, not CTR.”
…You are absolutely correct. My apologies. Please consider for this hypothertical case that as bid value increases, click throughs increase, but not linearly.

“Your hypothetical case doesn’t apply to some accounts. For example, our experience shows that any online store catering to price sensitive shoppers almost always performs best below the fold, in positions 5 to 8.”
…Thank you for that insight – and yes I realise that this hypothetical blog post cannot even begin to apply to every possible scenario. It does however seem to do a relatively good job of illustrating the primary point that profit needs to be taken into consideration and not simply cost per conversion.

“Ad Managers frequently create hypothetical cases which ignores reality. The reality is that most Advertisers don’t buy 100% of available impressions.”
…I don’t believe this hypothetical case ignores reality. Being an hypothesis, it is conjectural and is simply an attempt to provide some guidance or insights based on sumise rather than hard evidence. Again, the point I was trying to impart was that (from a 101 perspective) PPC advertisers should not get hooked on minimising their cost per conversions without taking into account actual profitability. The number of impressions advertisers buy is dependant on a number of variables. That too is beyond the remit of this post.

“Your analysis can only be applied if one understands the account in the context of impression share and budget constraints, and what alternative opportunities exist for each element of the account. For example, if the above account is achieving a 20% impression share, and losing 50% of impressions due to budget, then a lower bid might actually result in more traffic, not less traffic, and since we know that the below the fold positions favor shoppers, if Advertiser’s prices are very competitive, then below the fold bids might actually yield MORE traffic and revenue, not less traffic and revenue (because the budget / lower CPC is higher when the CPC is lower).”
…I am not disputing this point, but the detail you would have liked me to go into from what I can tell from your comment is too advanced for the nature of this post, and while it is intersting, and worthy of a post of its own, it neither adds to nor detracts from the point of THIS post – bear in mind campaign profitability, and don’t get stuck on CPC data when determining your ROI…

Thanks!

Aside from that, I disagree with you on several other points:

Presumably your “CTR” column represents clicks, not CTR.

Your hypothetical case doesn’t apply to some accounts. For example, our experience shows that any online store catering to price sensitive shoppers almost always performs best below the fold, in positions 5 to 8.

Ad Managers frequently create hypothetical cases which ignores reality. The reality is that most Advertisers don’t buy 100% of available impressions.

Your analysis can only be applied if one understands the account in the context of impression share and budget constraints, and what alternative opportunities exist for each element of the account. For example, if the above account is achieving a 20% impression share, and losing 50% of impressions due to budget, then a lower bid might actually result in more traffic, not less traffic, and since we know that the below the fold positions favor shoppers, if Advertiser’s prices are very competitive, then below the fold bids might actually yield MORE traffic and revenue, not less traffic and revenue (because the budget / lower CPC is higher when the CPC is lower).

http://sphinn.com/story/37543