Adsense Smart Pricing is Bad but How to Avoid It?

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The first thing you should know before blogging for money is the Adsense smart-pricing. It's a technique to improve value to advertisers by reducing the price they pay per adclick, ultimately reducing the pay publishers get per adclick. If you are in the categories whose blogs are smart-priced, then you'll be earning much less than what you were supposed to if you're not smart-priced. This article explains what smart-pricing is, what factors affect blogs to be smart-priced, and how to avoid being smart-priced. This guide is a summary based on Google facts and best tips on smart-pricing from top blogs.

Image credit: josef.stuefer.

What is Smart Pricing from Google standpoint?
Smart pricing was intoduced in April 2004 to improve advertisers Return On Investment (ROI) by adjusting the price of certain clicks. Here are some facts and implications on smart pricing based on the Goggle AdWords announcement:
  • Prices per click for advertisers are adjusted based on Google network's data of click conversion to advertisers' business actions (e.g. sales, registration, etc).
  • Cost-per-click (CPC) is reduced if that action improves value to advertisers.
  • Ad price estimation is affected by many factors such as keywords and types of blogs. For example, an adclick on videocam placed on a general photography tips blog may cost less than a click on the same ad placed next to specs and reviews on videocam.
  • The estimation of click values is done continuously and on an ongoing basis that ultimately saves advertisers time and money.
  • Advertisers get greater value and performance as the ad costs are appropriately set based on the quality and relevancy of information provided by sites/blogs to their customers.
Google explained further in its official Adsense blog about the facts on smart pricing as there are some misconceptions to how it's being implemented:
  • Ad prices are determined based on many factors: advertisers bid, quality of ad, other competing ads, ad campaign time period, and advertisers' conversion rate.
  • Click-through-rate (CTR) doesn't affect advertisers' ROI. Smart pricing is introduced to benefit advertisers, and the only thing that matters is the percentage of click conversion to ROI. Publishers' CTR has nothing to do with advertisers' ROI. What matters is clicks that bring in highly relevant customers that result in business actions.
  • Advertisers gain more from sites that bring in quality clicks (due to readers interest in their quality and relevant content). Generic clicks do not convert much to value for the advertisers. To gain most from Adsense, publishers should improve content quality, bring in targeted traffic, and improves the relevancy of content to ads.
  • The system of determining ad prices is updated regularly to improve the value to advertisers.
How Smart Pricing Affects Bloggers/Publishers?
Many bloggers have had some experiences on Adsense smart-pricing that affect the type of niche they choose and how they blog. Some of these experiences weren't highlighted by Google's guides. In essence, bloggers need to be aware of smart pricing and careful when first finding a niche to blog about if they want to gain the most from Adsense. I have compiled the most important 'facts' about Adsense smart-pricing based on these experiences around the blogosphere:
  • Reduced earning - Smart price means that the earning per click is reduced if your blog is being smart-priced. For example, you might earn $0.05 per click on an ad that could actually bring you $0.50 if you're not smart-priced. It also means that the advertisers pay less per click on ads these ads than the actual bidding price.
  • Affects entire account - Smart-pricing affects the entire Adsense account. If you have multiple blogs and only one of them is actually being smart-priced because it brings in low conversion rate to advertisers, then all the other blogs under the same Adsense account will be affected also eventhough these other ones converts well.
  • Won't know if you're being smart priced - You won't know which sites are being smart-priced and which are not, and you don't have any data to make any correct guess. What you can do to know whether your blog is being smart priced is by observing its performance or make educated guesses based on your earning per click or CTR.
  • Smart-pricing can be reversed - If your account is affected, remove Adsense ads from sites that you think are actually being smart-priced to avoid being smart-priced on sites that convert well.
  • Updated on weekly basis - Smart pricing is evaluated on a weekly basis. Changes are likely to occur the week after you've made any changes that affect smart-pricing.
  • Setup additional account - Some bloggers have set up additional Adsense account to serve different sites so that well-converting sites are not affected by smart pricing. But this requires approval from Google and actually difficult to get. Publishers need to provide additional company details or have different names for different accounts.
Does CTR Affect Smart Pricing?
Some bloggers say that blogs with low CTR will be smart-priced. This is contradictory to Google's statement. But many have experienced that the earnings per click is less when they have lower CTR, which then forced them to delete Adsense from these accounts so that it won't affects other blogs that do well on CTR. Courtney gave a tip that blogs with CTR less than 3% should not put Adsense to avoid getting smart-priced on the entire accounts.

Although Google says that CTR doesn't affect smart pricing, it can affect smart pricing indirectly. Blogs that have low CTR most likely are serving ads poorly targeted to the content. Some readers that do click on these ads tend to not be interested by the services/products offered on the advertiser sites as they're not targeted to the readers interest. So, in a way, low CTR blogs do seem to be smart-priced because of their poorly targeted ads. Accidental clicks on poorly targeted ads also convert to low CTR.

Traffic from social networks are well known to convert to low CTR compared to traffic from search engines. Visitors from social networks come across blogs/posts because of their reputation or popularity, not entirely because they are searching for them. They are not likely to click on ads. On the other hand, visitors from search engines come across blogs/posts because they are searching for those targeted contents and are likely to click on targeted ads to know more about those products/services that interest them.

Blogs about blogging (e.g. making money using blogs, blog tips) typically also convert to low CTR as bloggers are more familiar with the concept of contextual advertising and aren't likely to click on ads (hint: think about your tendency of clicking ads on blogs about blogging). This is not to say that these blogs will automatically be smart-priced, but many bloggers blogging on these topics do experience a huge drop on CTR and earnings per click compared to blogs on other niche topics. The key is about bringing quality customers that convert to advertisers business. If your blogs do provide high quality content and do bring in quality customers that improve advertisers' ROI, then there's no good reason for your blog to be smart-priced.

Tips To Avoid Being Smart-Priced
These are tips that have been compiled from many top blogs on the topics of smart pricing:
  • Create highly targeted content to search engine traffic.
  • Improves blog with highly targeted content and high quality articles that draw more interest to visitors on products/services being discussed or reviewed.
  • Improves Adsense design and placement to improves CTR.
  • Avoid blogging about blogs to avoid audience that don't tend to click ads (i.e. don't target us!).
  • Avoid building contents with the intention of targeting only social networks.
  • Delete Adsense on blogs that are being smart-priced, have low CTR (less than 3%), or generate low earnings per click (around $0.10 or less).
  • If possible (but extremely difficult), ask permission to create multiple Adsense accounts - one for blogs that convert well, and another for blogs that you suspect are being smart-priced.
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This post is a summary based on Google announcement and tips on smart pricing from top blogs. The post length is 1342 words.

2 comments:

Greg March 30, 2009 7:28 pm  

Nice article, thank you for the information!

Games Database December 29, 2009 3:30 am  

the tutorial is great...tnx very much
http://games-database.blogspot.com