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October 25, 2005

One poorly converting site can "smart price" an entire AdSense account

Google has said very little publicly about Smart Pricing secret sauce which results in some publishers earning more money for a click while others earn less (and yes, the advertiser will also pay less accordingly).

Here is the basis of how smart pricing works:

Google's 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.

And this often used example explains how this 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.

And since very little is publicly disclosed to publishers about how smart pricing specifically works, there are many questions surrounding it. However, while AdSense was attempting to get a publisher back from YPN, one support team member disclosed more details than perhaps he or she should have.

Here is what that team member disclosed, as well as other tidbits already known about smart pricing.

This raises the question about whether publishers should be removing AdSense from sites they suspect are converting poorly, in order to increase their smart pricing percentage. The loss of revenue could be more than made up with higher smart pricing across the rest of the account. But publishers do not have access to any of the data that would be used to determine which sites (if any) are converting better than others.

It would also be hard to 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.

Other things can also affect day to day earnings that have absolutely nothing to do with smart pricing. This means it is extremely hard to track without information AdSense is unwilling to disclose about each account.

This kind of unknown situation makes it very tempting for publishers to want a second AdSense account, especially for publishers that have quality sites as well as "less than quality" sites. While second accounts are hard to get, I bet there are publishers who will be working on getting a new company name for this purpose.

How do you plan on using this information? Removing AdSense - or swapping it for YPN instead - and wait a week or two and see if there seems to be an increase in CPM? Wait and see what others do?

Posted by Jenstar at October 25, 2005 06:14 PM

Comments

My cpm is as low now as it was before I even started optimizing adsense. I've already started converting a lot of ad space over to alternate programs, mainly Chitika. At first I did so to supplement earnings but soon I'll be replacing adsense alltogether.

YPN isn't available for me in Canada yet so that's not an option, but when it is I'll be trying it out.

An underperforming site influencing earnings from a well performing site just because it's stats are aggregated in the same account serves no purpose but to give them an excuse to pay less to publishers.

It's like saying "We're only going to pay Paul 3c per click, but if Mike owned the same site we'd pay him 20c." It doesn't make sense. (pun intended)

Posted by: Paul Short at October 25, 2005 11:31 PM

Smart pricing is just punishing the Publisher for the fact that the advertiser isn't good enough to convert the visit into a sale.
I think I will trial the Yahoo ads when they become available. and wait to see Google's reaction to the mass exodus from Adsense ;)

Posted by: Jafar Calley at October 25, 2005 11:58 PM

Well I substituted one of my low permorming ad blocks with chitika [non-contextual] I am seeing more or less simillar revenue uptill now but hopefully this move will effect the smart pricing.
Strangely I was suggested by Google to add more ad blocks to increase earning although it clearly decreases my share of the profits through smart pricing - I don't like that.. grrrr.

Anyways, YPN is still not available - I will give them a try but I will surely never give up adsense completely - it just needs to be tweaked to work well.

Posted by: roycerus at October 26, 2005 12:25 AM

I wouldn't treat this information as the ultimate truth, it's just one guy posting on WMW.
No offense, but as long as this isn't confirmed on the offical AdSense or AdWords blog, it'll be just a rumour for me.

Posted by: Phil at October 26, 2005 12:54 AM

Phil ... no offense mate but this is Jenstar we're talking about ... it might as well be straight out of Sergey Brin's mouth. I wouldn't wait around for the AdSense blog to confirm this. :)

Posted by: andy_boyd at October 26, 2005 01:48 AM

I know, I consider Jenstar a reliable source, too. But she only mentions the WMW post, so I guess her blog post is based on only that.

Posted by: Phil at October 26, 2005 01:59 AM

Phil .. maybe you're talking about Google courting former AdSense account holders to come back?

Posted by: andy_boyd at October 26, 2005 03:07 AM

From an advertiser perspective this is thrilling news! Does an advertiser has more insight whether he is smart-priced or not?

Posted by: Michael at October 26, 2005 07:04 AM

I always suspected this... time for some targeted pixel advertising.

Posted by: targeted pixels at October 26, 2005 01:28 PM

Seems to be far too true. I recently 'removed' adsense from one site while keeping it on another... the results? More earnings from that one site.

Posted by: Gary at October 26, 2005 01:54 PM

This is earth shaking news for AdSense publishers, and frankly I'm a bit shocked. *If* smart pricing was accurate, rolling back profits for weak websites would make perfect sense, but I never expected to be whacked by Google with such a blunt instrument. Some things are starting to make sense now...

Posted by: seo1.net at October 27, 2005 08:36 AM

That thread was the reason I blogged, simply because I had gotten so many questions about it. If you read a lot about AdSense or have a really good memory, the information has been posted in bits of pieces in various forums, I just simply tied it all together and blogged about it ;)

Posted by: Jenstar at October 27, 2005 10:29 AM

I had no idea something like this existed, the only reason I'm reading this is I was doing one last search before completely dropping Adsense from by big site (been using Adsense since near the beginning). I think I'll do a few tests by dropping it from my other smaller site and give it a week or so to see if it recovers. Otherwise I must switch to the other more traditional networks fairly urgently.

Posted by: ts at October 28, 2005 01:35 PM

If it is indeed true, I would imagine Google is already working on making it per site (at the very least). Smart pricing in itself is good for the long-term because it attracts more AdWords publishers. But paying less to AdSense publishers when they could be paying more (by basing smart pricing on a specific site) is in Google's best interest since the more Google pays out, the more they are making from advertisers.

Posted by: Shawn Hogan at October 28, 2005 05:57 PM

Today's official Adsense blog has additional, from-the-source info on smart pricing.

http://adsense.blogspot.com/2005/10/facts-about-smart-pricing.html

Posted by: Jimbo at October 28, 2005 11:15 PM

Adsense paid a lot at first but now it doesn't.

Posted by: http://financenstuff.blogspot.com/ at October 30, 2005 07:48 AM

jen when are you next updating your site! thanks! :)

Posted by: update at October 30, 2005 10:57 PM

i finall got yahoo ads!!!

google always says "dont be evil" and they turn around a be evil with adsense. one "invalid" click and bam youre otta there! :(

but i got yahoo now!!!

adsense kiss my a$$!!!

Posted by: yes yahoo! adsense go to hell! at October 31, 2005 02:33 AM

Thanks

Posted by: Frank Mash at October 31, 2005 05:38 PM

Jen, Thanks for an informative article.
At times Adsense gave me more than 5 figures per month. I dropped Adsense from all my sites after getting into YPN. Security

and trust is something I look forward to with Yahoo, something that Google has always failed in.


Yahoo's YPN is giving me 6 times (yes six times) more than Google per click for the same content. Why would I then want

Adsense on my site.

After loving Google passionately for five years, I am disgusted by Google's greed and attempts to jump into every industry.

Any publisher who seriously wants to build their business would be very hesitant to fall into Adsense trap once they have

opened their eyes and found other options (YPN).

IMO, soon they will be history.

Posted by: Softwareengineer99 at October 31, 2005 05:43 PM

go figure what would happen when they dont tell you what you make with their program!

its just another loophole to boost there earnings for the stock market.,

think about it.. (why shouldnt they tell you what you make?)

hey one day we'll give you 50% of the click and the next day our stock is going down so we need only give you 19%

adsense you suck a little more honesty will save your bussines as for now go to YPN

Oh and I accidently clicked on one of my ads I ran to google with an email confessing ( like I was a criminal most likly over a nickle ) YPN has a filter I dont need to wory about this any more, but I havent clicked on any of my own ads and if i did oh well they see its me and it doesnt count!

after all we are all webmasters we are at our sites every day THINGS HAPPEN!

Posted by: mike at January 29, 2006 01:10 AM