Facts About Smart Pricing
Let me break down exactly just what this ’smart pricing’ really is. There is a lot of confusion as to the exact definition of the system adsence uses.
What is Smart Pricing?
Google’s smart pricing feature automatically reduces maximum cost-per-click (CPC) bids for certain pages in the Google Network.
Essentially if Google decides the click on any given ad is less likely to result in a sale for their advertisers they reduce the price of that click, so in theory the advertiser saves money which makes them happy, Google makes less money a long with the publisher.
Lets break this down and look at just how Google come to these conclusions on smart pricing.
Continue reading after the break.
Information taken from the official Adsence blog
1. Many factors determine the price of an ad
More than conversion rate goes into determining the price of an ad: the advertiser’s bid, the quality of the ad, the other ads competing for the space, the start or end of an ad campaign, and other advertiser fluctuations.
2. Clickthrough rate doesn’t affect advertiser return on investment (ROI)
The percentage of clicks that convert for an advertiser is the most important factor in an advertiser’s ROI, so it’s not only possible, but common, to have a low CTR and a high advertiser conversion rate. It’s also possible to have a high CTR and a low conversion rate. Don’t remove the AdSense code from your site just because it has a lower CTR – it may be one of your best converting sites.
3. Google doesn’t make money from ’smart pricing’
In fact, we make less money, since the cost to advertisers is reduced in order to provide a strong ROI. Ultimately, this leads to higher payouts for publishers by drawing a larger pool of advertisers and rewarding publishers who create high quality sites.
4. Remember the old chestnut: “Content is King”
The best way to ensure you benefit from AdSense is to create compelling content for interested users. This also means driving targeted traffic to your site — advertisers don’t gain as much ROI when paying for generic clicks as they do for quality clicks that come from interest in your content. Good content usually equals a good experience for user plus advertiser, which can be much more valuable than CTR.
Keep in mind that like most Google technology, our system for calculating advertiser pricing gets updated regularly. We’re constantly improving our ad products to benefit both the publisher and advertiser communities; what benefits one side ultimately benefits the other.
So reading over this you can see Google basically decides in the interest of the advertiser if the traffic you have just provided to their site is likely to convert into a sale and decides to credit you the publisher accordingly. Now producing original content seems to be key here. Original content = better traffic = more money to the publisher per ad click on their site.
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