Search Engine Herald

Google Responds to Smart Pricing Controversy

by Gilad on October 31st, 2005

Las week it was Jansense who hung the dirty laundy on her site posting about Google’s smart pricing method and the fact that one poorly converting site can lower the pay across the entire network of a certain publisher.

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

This information comes at a pretty bad time for Google, as YPN is preparing to step out of beta, MSN is taking new publishers, and even Chitika is catching on pretty quick.
As a part of their damage control and in attempt to calm some of the publishers, they posted on their blog,

“We’ve noticed a lot of talk recently about the phenomenon commonly referred to as ’smart pricing’. There are some misconceptions out there about this, so we wanted to provide a few facts about smart pricing and how to ensure you’re maximizing your revenue.”

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.

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.

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