Friday, June 10, 2016

The Mystery of AdSense Smart Pricing

Lots of AdSense publishers have probably heard the term "smart pricing", but how many know exactly what it is, or how it's applied to AdSense earnings?  I suppose not very many - me included.  While AdSense provides some information and insight into smart pricing on the publisher side of things, they certainly don't spell out the exact details of how it works, nor are they ever likely to.

Is it applied to entire publisher's account? To all their websites? To all their traffic?

When you look at AdSense's basic explanation to publishers and then look at how they explain smart pricing to the advertiser, there is a very slight difference in those explanations, but that difference can help you form your own opinions on how it might work.

AdSense Publisher
"Google’s smart pricing feature is designed to raise advertiser confidence in the AdSense network, which in turn can lead to higher bids on ads that appear on publisher sites. This then benefits the entire advertising ecosystem of publishers, advertisers, and users in the long run."

AdWords Advertiser
"Smart pricing is a Google feature that may reduce your cost-per-click (CPC) bids on the Google Network."
"We are constantly analysing data across our network against a variety of factors. If our data shows that a click from a Google Network page is less likely to turn into an actionable business result - such as an online sale, registration, phone call or newsletter sign-up - we may reduce the bid for that page."
"Google saves you time and hassle by estimating the value of certain clicks and adjusting bids on an ongoing basis. With no extra effort for you, Google technology helps ensure that you get strong ROI from your AdWords advertising."

Publisher Earnings & Smart Pricing

Because Smart Pricing is really designed to help the advertisers, it can reduce the cost an advertiser pays for a click on an AdSense ad, so that basically means that the AdSense Publisher is going to see a reduced value for a click on an ad. That's just common sense - the advertiser can't pay less per click while the publisher earns more. But does that mean that  if a click is smart priced, the publisher's whole account, or all their websites are being smart priced?

I don't think so. Keep in mind that nobody really knows the finite details of smart pricing, but in my opinion smart pricing isn't always going to result in every click being smart priced. Nor does it mean a website or publisher account is automatically smart priced so that all CPC values are lower.
"Smart pricing is designed to help advertisers confidently bid the maximum they’re willing to pay for their ads, which will increase publisher revenue over time. If a click is determined to be less likely to lead to a business result like a purchase or a newsletter sign-up, an advertiser’s maximum bid may be reduced."
I think it could be possible to see a website or entire account smart priced, but in general, the statement above indicates that AdSense analyzes the click on a site (or clicks) to determine smart pricing.

If your site gets a lot of traffic that clicks ads (which results in you having a reasonably high CTR) but the visitor doesn't seem interested at all in the advertiser, I suppose it could be happen that eventually the traffic from a particular site could be smart priced (there is zero proof of that, since it's really just a hypothesis). After all, would advertisers want to keep paying higher rates for the traffic from a website that consistently provides no return on the advertiser's investment?

I think that every publisher might see some traffic or clicks smart priced, but I also think that for the average publisher who receives traffic from many different sources (search results, social media, shared links, forum signatures, backlinks, etc.) it would be very difficult to determine if smart pricing has been applied or not. As publisher's it's impossible to break it down to individual clicks.

In any given 24 hour period, a publisher could see click values on ads range from high values ($1+) to low values (1¢) and everything in between. How do you determine if any of those have been smart priced? You can't assume that a 1 or 2 cent click is smart priced (please see the information about the ad auction). Keep in mind that many advertisers that use AdWords aren't full-time businesses, or wealthy people. Some are just ordinary "little guys" with not very much to spend in their advertising budget. Some will try to stretch those funds as far as possible. It's a good idea for publishers to understand how the ad auctions really work:

If you take five minutes to watch the video on the page above, you will gain a better understanding of how AdSense determines what an advertiser will pay for a click, and it isn't all about the per click cost an advertiser has bid. The advertiser quality score always plays a part in the determining factor too, so while you might think that an advertiser has only bid 1 cent, that may not actually be what the advertiser's actual bid was. This means that you can't determine if advertiser's have bid low or not.

What You Can Do

Instead of running off willy-nilly and assuming your account or site is smart priced, take steps to re-evaluate your ad placements, and the types and formats of ads you've used on your website. Review your traffic streams and and review your own methods of promotion for your sites - the more circumspect you are about how and where you gain your traffic, the more likely it is that more of your traffic will convert well for the advertiser. There is no guarantee that traffic from anywhere, not even direct from Google search results will provide you with higher earnings (but they might), however, doing your best to ensure that the visitors finding your site are doing so out of interest for your contents, the better a publisher you will become.

posted by J. Gracey Stinson

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