What Is Smart Pricing on Google AdWords?

By Daniel Scocco

questions and answersThis post is part of the Friday Q&A section. If you want to ask a question, just write a comment below.

Iam asks:

I keep hearing about this “smart pricing” deal related to Google AdSense ads, but I am not sure how it works. Could you explain?

Smart pricing is a feature that Google has inside its AdWords platform (which is where advertisers can buy clicks and impressions both on Google search results and on the content network) to ensure that advertisers will get a good value for their money.

Here is how it works: Google will analyze the results that the advertiser is getting from all the pages and websites where he is buying clicks. These results may be product sales, newsletter sign-ups or whatever goal the advertiser has for his ad campaign.

If Google finds that a certain website (i.e., this could be your website if you use Google AdSense) is producing good results for the advertiser, then the site owner will earn an amount per click that is close to what the advertiser is paying – meaning that Google’s share as a middleman will be small.

If, on the other hand, Google finds that such site is producing bad results, the smart pricing mechanism will trigger, giving a discount on the value that the advertiser is paying per click by automatically reducing his bid amounts. This discount will come out of the pocket of the site owner, who will be paid a smaller amount per click.

It is not completely clear how Google tracks the performance of the clicks coming from a specific website, but it probably takes into consideration the keywords that triggered the ads, whether or not the visitor returned to the site after clicking on the ad and so on.

So how does this affect you as a web publisher/blogger? Well, if you use Google AdSense to monetize your site you might want to pay attention to the ads that are being displayed there. If you get too many unrelated ads there is a chance that your clicks will be seen as “low performance” ones, reducing the amount you’ll earn per click. To solve this problem you can use an AdSense feature called section targeting.

It might seem that this is an evil feature to reduce how much publishers earn, but in reality Google uses it to ensure that advertisers will get a good return on their AdWords investments. And if they do they’ll spend more money there, giving publishers more opportunities to earn.




Share

7 Responses to “What Is Smart Pricing on Google AdWords?”

  • Dave Higgs

    Thanks Daniel;

    I never knew they did this, but I don’t use Google so it does not bother me.

    Do you know if other providers (chitika, adbrite etc) are planning to follow suit?

    Regards
    Dave

  • Daniel Scocco

    @Dave, I doubt smaller networks will implement it, as you need to have a very sample of data to work with (and they don’t), and you one would need to spend a lot of time and money to develop a similar technology.

  • Dana @ Blogging Update

    I think this is which make my earning drop.

  • Lucian Apostol

    If you try to make your CTR as much as you can, that means that more users from your site will go to advertisers site. The number of users who clicked by mistake, or by curiosity, or just clicking away but never doing anything will be higher. The most cases when they think that the ad is something from your website, they click and then immediately come back. A high CTR will get this number high, and you will be paid less for your clicks. That happened to me many times.

    To prevent this, you could try to alternate stuff. For example two months try to use other advertising methods more, such as affiliate marketing, and keep google adsense in good spots, where your visitors will see it, but make sure they will not think that they are part of your website. That means that those users will be very targeted for the advertiser, and they will actually do something on their websites. Keep that low for few months and try to take benefit from other ways to make money: affiliates, ad sales.

    After few months of having a low CTR, switch to adsense again, get your CTR high. You will be amazed of the results. The smart pricing won’t be implemented immediately. They keep track of recent history, they have to test, to see, to analyze data. And the data they analyze is the data when you sent valuable visitors.

    One of my sites made $100/month from adsense. Good traffic, low CTR, i was focused on other things. I changed the ad placement and the next month i earned 600$. Then 400$, and for the next few months 250$.

    You are not doing anything illegal, you just try out other monetization ways, find out that they are not so good and then switch back to adsense.

  • Paul

    Very good post. It explains why my adsense revenue is less than I would hope to have. It is now just a matter of adjusting the code according to the “Section Targeting” advice.

    Very helpful.
    Paul

  • Angel

    But, If this is true the advertiser can say to google that he is getting a low product sales or whatever in order to pay less for the ads.

    I doubt that if I use Google Adwords I have to tell google how much I earn with the campaign and from my point of view there are a lot of ads that are not just buying a product they are showing a brand so how they are going to track this?

    Thanks in advance for any answer.

    Regards.

  • muhyar

    I’ve read this post twice, now it is adding my knowledge through adwords

Comments are closed.