Adsense smart pricing: Better than the alternatives

After reading a blog entry on JenSense, about how "One poorly converting site can "smart price" an entire Adsense account", I got the opinion that many webmasters like yourself did not like the idea of smart pricing.

Here is the basis of how smart pricing works:

Google's smart pricing feature automatically adjusts the cost of a keyword-targeted content click. So if our data shows that a click from a content page is less likely to turn into actionable business results - such as online sales, registrations, phone calls, or newsletter sign ups - we reduce the price you pay for that click.

And this often used example explains how this works more precisely.

As an example of smart pricing, consider two websites, each related to digital photography. The first page features digital camera reviews, while the second offers photography tips. Clicks from the page of photography tips might be charged less, because they are expected to convert into sales less frequently, resulting in lower value for advertisers. Google data determines that clicks from the digital camera reviews convert better, so clicks from this page are not discounted.

Advantages of smart pricing

A while back, I went through a phase of looking for an alternative to Adsense. Some of the alternatives were good, but so many of them require you to explicitly state which sites you are going to place their advertisements on. This is alright for people who own one site, but it can be a big hassle for people who own more than one site.

As Adsense does not require each website to be explicitly stated, it has opened the doors to alternative models, like revenue sharing forums. It is just one thing that makes Adsense a lot simpler than the alternatives.

The problem with not explicitly stating the websites that Adsense will be on, is that it is hard to tell where one site stops and another site starts. From Google's point of view, every domain and sub domain is a new site, but there are sites out there that cross sub domains and even domains. So as a result, Adsense smart prices the entire account.

What separates your site from the others?

Your site is unique for one reason and one reason only; it has been created by you. You have put your foot print on the site and your views and opinions have made the site unique. Even across all my sites, there are similarities:

  • If I have a professional template created for one site, there is more chance that I will have professional templates for all my sites.
  • If one of my site is written in British English, there is little chance of my others are in US English.
  • If I have found an Adsense placement that works well, I will use it on most of my sites.

All these little differences affect Adsense and which advertisements work best on your site.

Facts about smart pricing

Keep sites with low click through ratios
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.
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.
Google doesn't make money from 'smart pricing'
In fact, they 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.
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.
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