What is Smart Pricing and How it works

Smart Pricing is a technique used by Google to determine the cost of a click on a keyword trageted Ad in an Adsense website.

Now let us see how smart pricing works:

According to Google, 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 signups - we reduce the price you pay for that click.

Let us understand this with a very popular example that shows how Smart Pricing 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.

Here is what we know about Smart pricing:

• Smart pricing affects an entire account. It is not on a per page or per site basis.
• One poorly converting site can result in smart pricing impacting an entire account, even sites completely unrelated to the poorly converting one.
• Smart pricing is evaluated each week. So removing ads from sites you suspect are converting poorly could result in seeing an adjustment to a higher smart pricing percent in as little as a week.
• Smart pricing is tracked with a 30 day cookie, so you could be rewarded for new conversions that saw the initial click from your site up to 29 days earlier.
• Image ads are also affected by smart pricing.
• With smart pricing, an advertiser could end up paying less than their minimum bid, which would theoretically include the minimum bid price available, meaning publishers earn less for even the minimum valued clicks.
• Conversions for smart pricing publisher accounts are tracked by those advertisers who have opted into AdWords Conversion Tracking

Now what should the publishers do to not to hurt from Smart Pricing? Technically, they should remove (or reduce) the Adsense ads from poorly converting page or sites (if they have multiple sites under a single account). The loss of revenue from poorly converting Ads may well be offset with the rise in the CPM of the rest of the site. Again, this is to be determined carefully after examining the extent of difference that the Smart Pricing is making and also requires some experimentation. However, the bad news is that the publishers do not have access to any reliable data that would be used to determine which sites (are pages) are converting better than others.

Publishers can not even tell this from AdSense stats - even using channels to differentiate sites because one site with a low CPM could actually be converting the highest, but is simply in a lower earning niche. But a publisher could mistaken a low CPM for also being poorly converting and remove those ads... which could result in even smart pricing reducing overall per click earnings even more.

So the best bet, perhaps, is to experiment and see the change the resulting CPM. Smart pricing changes will happen once in week. So one can see the changes in as early as a week.