A new feature at Google AdWords has just been released globally, and will be known as 'preferred cost bidding' or 'preferred CPC bids'. This new feature allows advertisers to specify the average cost per click or CPM (cost per thousand impressions) they want to pay within their AdWords campaigns.
Google says the feature was added in response to "advertiser demand for greater control over how they manage their bids and costs", and expects that advertisers will be better able to maximize ROI.
The AdWords algorithm will work constantly to achieve the target price set by the advertiser. The average price model is designed as an alternative to the existing maximum bid system, which often forces advertisers to pay more up front, based on the competition, and aim for an average cost per conversion instead.
By agreeing to an average cost per click or impression, advertisers should be able to feel more confident in their CPA targets. However, this could potentially mean advertisers will have slightly less control over positioning, which may also affect conversion rates.
Only time and testing will tell for many advertisers.