At Search Engine Strategies Chicago in December, Emily White spoke briefly about contextual advertising… from the advertisers point of view, and complete with a fancy power point to illustrate it.
Smart pricing was launched on April 7, 2004, amid cheers from the advertisers and jeers from a large percentage of publishers. But interestingly, since the launch of smart pricing, advertiser ROI in content has increased 50%.
In a nutshell, smart pricing estimates what the ROI would be on any given publisher’s webpage for the ads running on there, and discount the cost of that ad to the advertiser, and thus the earnings the publisher would make on that click.
This means that if a page has a higher liklihood of conversion, the advertiser may pay higher than the same ad running on a page where the liklihood of a conversion is much lower. This discounting is done automatically and “on the fly”.
With such a dramatic increase of ROI to advertisers, it should encourage advertisers who may have initially turned off content targeting in their Adwords account to perhaps give it another try. Advertisers will likely discover a lower cost associated with running their ads on the content network, as well as seeing a lower cost and higher ROI when compared to their ads run on content last year.