Google Ads glossary
A bid is the most you are willing to pay for a click on your Google Ads ad, and you often pay less.
On every search, Google runs an auction among eligible advertisers. It ranks ads by Ad Rank, the rank calculated for each ad in each auction. Your bid is one input, along with the quality of your ad and landing page, the context of the search and other factors.
You set bids by hand, or you let an automated strategy set them to reach your goal. Either way, the bid caps the price: the click often costs less.
Bidding higher does not make a click more useful. On a search with no buying intent, a high bid only buys more visitors who will not buy.
So the question comes before the amount: should you bid on this keyword at all? That is the question Should I Bid answers, with a Bid, Test or Skip verdict, before you touch a bid.
An invoicing software company is torn between “invoicing software pricing” and “free invoice template word”. Putting the same bid on both does not give them the same value. The first search comes from someone who wants a tool, the second from someone who wants a free file.
Free tool: ROAS calculator
The ROAS calculator gives the maximum CPC you can pay and still make a profit, from your margin, your average order value and your conversion rate.
Official source: Google Ads Help: how the auction works, Google Ads Help: maximum CPC