Are there any downsides to aggressive bidding in ad auctions?
Bidding to position 1 in Google is perfectly acceptable, but you need to pay close attention to your keywords.
Typically, generic unbranded keywords shouldn't have bids higher than position 3, because of low purchase intent, and people at this stage are performing research on a service or product.
Ranking #1 for Branded Terms
While you may not want to target people researching products and services with PPC ads as much, you should always be in position 1 for branded terms.
There are a couple reasons for this: Competitors shouldn't appear at the top of SERPs for your brand, and clicks tend to be inexpensive because of a high quality score) and a high conversion rate.
Some may want to bid high initially for branded terms and leave them to help ensure they're always on the top for those.
However, as CPC often decreases for certain terms, this isn't a necessarily cost-effective method.
Practice Good Judgment When Bidding
The best policy is to keep bids realistic, which helps you avoid overcharging. Ultimately, there are downsides to bidding unnecessarily high, but aggressive bidding can be cost-effective if done well.
Your main point of focus should be on branded terms, rather than bidding high on more generic terms. This way you can keep your brand highly visible without spending more than you need to.