Today many AdSense publisher accounts suffer from being “smart priced” by Google. Smart pricing was introduced in April 2004 after Google had realized that all clicks were not created equal. Before smart pricing advertisers paid a flat rate per click. If an advertiser bid 50 cents for a keyword each click cost the advertiser 50 cents, and the money was split between Google and the publisher.

What smart pricing does is take into account how well clicks are converting, in other words how well clicks result in “customers” for the advertiser. If clicks from your website convert well you get paid more and if they convert bad you get paid less. The algorithm Google is using is much more complex than this but the basic function remains the same. Smart pricing is said to be determined on a weekly basis so it can cause great variance in your earnings from one week to the next.

Smart pricing is a way for Google to determine the quality of your website and your traffic from the advertisers point of view, but unfortunately the effect of smart pricing affects your entire AdSense account. If one of your websites have a low click to conversion ratio it will cause all of your websites to be smart priced, and there is no quick way for you to know which website is at fault.

There is a lot of talk about low quality publishers and traffic is hurting the advertisers, but what about low quality advertisers? Can’t the quality of the advertisements increase the risk of the publishers getting their websites smart priced?

First of all, what is a conversion? Well of course that depends on the advertiser. It could for example be that after clicking the ad the…

• 1. …user keeps browsing the advertisers website.
• 2. …user signs up for a trial account.
• 3. …user purchases a product or a service.

What counts as a conversion depends entirely on the topic of your website and the type of advertisements that are displayed. When reading ads on my own and other’s websites I have noticed an abundance of what I would call “low quality ads”. These are advertisements that encourage clicks, but once you click and get to the advertisers website you see that the advertisement doesn’t hold its promise. The most obvious examples are advertisements that promises something for free and then it turns out not be free at all.

Personally I am quite convinced that low quality advertisers can hurt publishers because of a low click to conversion ratio, especially small publishers with a low number of total clicks. At the same time I really don’t understand why advertisers would use “false advertising” when they are paying per click.

Daniel