homepage Welcome to WebmasterWorld Guest from 54.166.116.36
register, free tools, login, search, pro membership, help, library, announcements, recent posts, open posts,
Become a Pro Member

Home / Forums Index / Google / Google AdSense
Forum Library, Charter, Moderators: incrediBILL & jatar k & martinibuster

Google AdSense Forum

This 42 message thread spans 2 pages: 42 ( [1] 2 > >     
smart pricing uses flawed logic
when compared to print media
Publisher

5+ Year Member



 
Msg#: 13012 posted 1:37 pm on Mar 27, 2006 (gmt 0)

As I understand it, smart pricing reduces the payout for ads that are clicked but are not converted into some defined action at the advertiser's site.

That is like a magazine telling an advertiser that "you run your ad in my magazine and if you don't make sales I'll reduce your cost". I don't know of too many magazines who do that.

The program puts the onus on the advertising medium to generate the sales. What if the advertising website is pushing a unwanted offer, or the site is poorly designed, or cumbersome to use, etc. There are a million reasons why a website doesn't convert and very few of them are the fault of the adsense publisher.

 

inerte

5+ Year Member



 
Msg#: 13012 posted 1:59 pm on Mar 27, 2006 (gmt 0)

There are a million reasons why a website doesn't convert and very few of them are the fault of the adsense publisher.

And who pays for it?

The advertiser must be protected. The very own reason of AdWords' sucess is because the 'net allows you to track the sucess of a campaing.

On traditional media, you look for a medium with the profile of your costumers and throw money hoping that someone will see it. Then you have to research what effect it generated on people.

But not with AdWords. You have much more detail. You have when they saw your ads, for what (the searchs and, if you trust, Google's AdSense targetting), how successful it was (the % clicks), and most important, _what_ happened. You track visitors from campaings that effectively bought your products/services.

Publisher

5+ Year Member



 
Msg#: 13012 posted 2:51 pm on Mar 27, 2006 (gmt 0)


The advertiser must be protected. The very own reason of AdWords' sucess is because the 'net allows you to track the sucess of a campaing.

Advertisers also track print media ad campaigns, it's just not an instantaneous tracking.

But not with AdWords. You have much more detail. You have when they saw your ads, for what (the searchs and, if you trust, Google's AdSense targetting), how successful it was (the % clicks), and most important, _what_ happened. You track visitors from campaings that effectively bought your products/services.

All this does is track whether people come to your site through adwords.

My point is that if the site owner is selling something that nobody wants, it now becomes the problem for the adsense publisher.

In print media, the company selling an item takes the full risk of promoting their product. With adsense, the publisher also is forced to take some of the risk. If their site is populated with ads for companies selling something nobody wants, the publisher take the hit, too, and thay have no control over what the advertising company is selling.

phantombookman

10+ Year Member



 
Msg#: 13012 posted 3:05 pm on Mar 27, 2006 (gmt 0)

As I understand it, smart pricing reduces the payout for ads that are clicked but are not converted into some defined action at the advertiser's site.

As I understand it, it is low CTR that triggers smart pricing not what happens after ads are clicked.
How would Google even know what you did after clicking on an ad?

annej

WebmasterWorld Senior Member annej us a WebmasterWorld Top Contributor of All Time 10+ Year Member



 
Msg#: 13012 posted 3:35 pm on Mar 27, 2006 (gmt 0)

Are you sure it's low CTR that lowers smart pricing? This was a popular theory a while back.

My impression is that CTR may have little or nothing to do with how well ads convert to sales. I think Google has more sophisticated ways to measure conversion.

ronburk

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 13012 posted 3:40 pm on Mar 27, 2006 (gmt 0)

That is like a magazine telling an advertiser that "you run your ad in my magazine and if you don't make sales I'll reduce your cost". I don't know of too many magazines who do that.

It's more like an advertising agency saying to a publisher "gee, I just don't think yer magazine is quite doin' it for us, and we've got other places we can advertise, and we could also take some of our other clients with us if we go, so let's talk about knockin' down that price."

I don't know of too many advertising agencies who don't do that.

phantombookman

10+ Year Member



 
Msg#: 13012 posted 3:41 pm on Mar 27, 2006 (gmt 0)

Hi Anne
not sure at all, just going on what has been said before. I wholly agree that CTR has nothing to do with final conversions and I hope they do not use this a yardstick.

I do vaguely recall that either GG or ASA once mentioned something once about not looking at your own ads in a style which suggested that continually doing so was counter-productive.

europeforvisitors



 
Msg#: 13012 posted 3:55 pm on Mar 27, 2006 (gmt 0)

As usual, Ronburk has hit the nail on the head.

It's also worth noting that, unlike magazine advertising, AdSense ads are sold on a cost-per-click basis--and there are thousands of unvetted Web sites running the ads and doing everything they can to encourage clicks.

Swiftest

5+ Year Member



 
Msg#: 13012 posted 5:15 pm on Mar 27, 2006 (gmt 0)

Google has an automated way for the advertisers to notify Google if a click-through accomplished a sale, ie., "converted." There's a piece of code that advertisers can hook into their payment backend to notify Google.

I'm guessing this is how they implement smart pricing. Too few reported conversions and Google reduces your earnings per click.

I agree with the original poster though. Right now, it's too slanted in favor of the advertiser. To level the playing field, Google should let publishers drop advertisers who report low conversions.

The door swings both ways. I as a publisher don't want advertisers that convert poorly to drag down the earnings from sites that do convert.

(As an aside, I wonder how their system detects unscrupulous advertisers who falsely report?)

jomaxx

WebmasterWorld Senior Member jomaxx us a WebmasterWorld Top Contributor of All Time 10+ Year Member



 
Msg#: 13012 posted 5:21 pm on Mar 27, 2006 (gmt 0)

I agree with others that your "magazine" analogy is faulty. From my point of view it is what it is, but if you want to use an analogy then think of an advertiser's spots showing up on hundreds of different magazines, of wildly varying quality and audience demographics.

Celicaphile

5+ Year Member



 
Msg#: 13012 posted 5:26 pm on Mar 27, 2006 (gmt 0)

Google has an automated way for the advertisers to notify Google if a click-through accomplished a sale, ie., "converted." There's a piece of code that advertisers can hook into their payment backend to notify Google.

And if the advertiser doesn't have a payment backend or they don't use that piece of code, then this is very flawed. I can't imagine a huge percentage of advertisers are doing this..... Plus, it seems to be Google placing the value on the click, not the advertiser. If it's the goal of an ad to increase membership, not directly make sales, and it's working for the advertiser, who is Google to say it's the clicks generated by Adsense publishers are not of enough value, thus enacting smart pricing?

europeforvisitors



 
Msg#: 13012 posted 5:27 pm on Mar 27, 2006 (gmt 0)

I think several things are being overlooked here:

1) Smart pricing may take known conversion rates for individual publishers into account, but such data isn't essential. When Google announced smart pricing, it mentioned the type of content as a factor: for example (and this was Google's example), a click from a page of photo tips would be less likely to convert than a click from a review of a digital camera, so it would have a larger smart-pricing discount.

2) A "conversion" doesn't have to mean a sale. It can be any business action defined by the advertiser (or by Google): e.g., an inquiry, a newsletter subscription, a registration, etc. In other words, AdSense ads can be (and often are) used for lead generation, not just for e-commerce transactions.

3) While it's true that the quality of the advertiser's Web site, offer, etc. will influence conversions, it's equally true that the quality of the advertiser's ad will influence clickthrough rates. So, if you dislike smart pricing because you don't want an advertiser's incompetence hurting your revenues, you might want to rethink participating in AdSense or other cost-per-click ad networks (as opposed to CPM networks) for the same reason.

gregbo

WebmasterWorld Senior Member 5+ Year Member



 
Msg#: 13012 posted 11:03 pm on Mar 27, 2006 (gmt 0)

Google has an automated way for the advertisers to notify Google if a click-through accomplished a sale, ie., "converted." There's a piece of code that advertisers can hook into their payment backend to notify Google.

Assuming it is implemented properly, and connectivity is present between the advertiser and Google at the time of sale, and that all parties are honest (as you noted).

Publisher

5+ Year Member



 
Msg#: 13012 posted 11:31 pm on Mar 27, 2006 (gmt 0)

[quote]So, if you dislike smart pricing because you don't want an advertiser's incompetence hurting your revenues, you might want to rethink participating in AdSense or other cost-per-click ad networks (as opposed to CPM networks) for the same reason.[\quote]

That's essentially true of everything...if you don't like it, don't do it.

hardly constructive, though

europeforvisitors



 
Msg#: 13012 posted 11:59 pm on Mar 27, 2006 (gmt 0)

What's not constructive about pointing out something that the poster obviously hadn't thought of?

If a publisher questions the validity of smart pricing because the quality of the advertiser's Web site is beyond his control, then shouldn't he also question the validity of pay-per-click compensation when the quality of the advertiser's ad is beyond his control? And isn't it possible that he'd feel more comfortable with CPM ads, where the publisher (not the advertiser or Google) sets the rate?

The bottom line is that a publisher has two choices:

- Cede control to Google and the advertiser (via auction-based CPC rates and "smart pricing" discounts), or...

- Maintain control by charging CPM rates, either through direct ad sales or by using a CPM ad network that lets publishers pick and choose campaigns.

But there's no "in between": Publishers can't choose to use AdSense and determine rates. That isn't going to change.

walkman



 
Msg#: 13012 posted 12:02 am on Mar 28, 2006 (gmt 0)

>> As I understand it, smart pricing reduces the payout for ads that are clicked but are not converted into some defined action at the advertiser's site.

if true, the logic is sound to me. Why pay the same price to a site that keeps sending useless clicks?

JuniorOptimizer

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 13012 posted 12:16 am on Mar 28, 2006 (gmt 0)

Print advertisers charge a premium because their product has shelf-life. Paid clicks have no shelf-life. If the customers don't convert, it's like money being thrown down the drain. Google needs to offer a discount to even make their product competitive.

Visi

10+ Year Member



 
Msg#: 13012 posted 12:26 am on Mar 28, 2006 (gmt 0)

Since the inception of "smart pricing" Google has also changed the methods for rate calculations to adwords users, including the addition of a quality score. The basic formula stays the same however with higher click rates being rewarded with lower costing to the advertisers. At the same time Google is calculating the highest paying ads to be displayed by the same basic formula...namely epcm....not necessarily epc. Just my opinion on the discussion here.

annej

WebmasterWorld Senior Member annej us a WebmasterWorld Top Contributor of All Time 10+ Year Member



 
Msg#: 13012 posted 1:57 am on Mar 28, 2006 (gmt 0)

quality of the advertiser's ad will influence clickthrough rates

I've clicked on ads using the preview tool simply because the ad looked like something I would be interested in. Once on the site sometimes I can't even find the object the ad advertised. If I have to search all through thier e-business site to find what they are selling it's not my fault the ads don't convert. Of course some are MFAs that never had the item but just want to get you on their site.

Just as I wish Google could get rid of MFAs I wish they would get rid of the ads that trick the person to get on their site when they don't really have the item.

birdstuff

10+ Year Member



 
Msg#: 13012 posted 2:21 am on Mar 28, 2006 (gmt 0)

I think several things are being overlooked here:

If you think about it logically, "things" # 1 and #2 are actually great examples of why smart pricing simply cannot work with any reasonable degree of accuracy as implemented.

On #3 we actually agree.

europeforvisitors



 
Msg#: 13012 posted 2:53 am on Mar 28, 2006 (gmt 0)

If you think about it logically, "things" # 1 and #2 are actually great examples of why smart pricing simply cannot work with any reasonable degree of accuracy as implemented.

I disagree, but in any case, it doesn't have to work with any reasonable degree of accuracy--it only needs to work well enough to keep advertisers coming back.

birdstuff

10+ Year Member



 
Msg#: 13012 posted 3:33 am on Mar 28, 2006 (gmt 0)

it only needs to work well enough to keep advertisers coming back.

That's a very short-sighted view if Google indeed shares it, and it will eventually come back to bite them in the...

jomaxx

WebmasterWorld Senior Member jomaxx us a WebmasterWorld Top Contributor of All Time 10+ Year Member



 
Msg#: 13012 posted 6:45 am on Mar 28, 2006 (gmt 0)

Hardly. As I've had to point out many times, advertisers are the ones footing the bill for this party and they're the ones you have to keep happy at any cost.

darkmage

10+ Year Member



 
Msg#: 13012 posted 9:19 am on Mar 28, 2006 (gmt 0)

Well I work in print publishing and media - I can tell you for a fact that an equivalent of smart pricing does happen. 'Publisher's' original post is confusing several concepts and really doesn't show an understanding what goes on in traditional media.

The 'smart pricing' process in traditional media is a little different to Google's version and it generally applies to big clients who have the prospect of long run or repeat campaigns. It serve two purposes: long term good will and an incentive for an advertiser to take a risk with the publication or media outlet.

It is very common in TV or Radio for advertisers to get credit if ratings projections are not met, especially if it is a big event. In print, depending on the type of ad, there may be a 'call to action' clause (eg if we don't get at least 1000 calls to the number, you will run the ad again for free.)

The misconception and important difference is that Adsense is rarely, if ever, a pure branding exercise. Type in Cola or Soda into Google and the displayed ads are NOT for Pepsi or Coca-Cola. They are ads for Ebay, Bars and other ways of making money from an online user. Yet most of Pepsi and Coke's tradional media buy is branding.

In other words, Google is not using flawed logic. It differetiates between branding and call to action. Plus it takes a widely used concept in the media and opens it up to all media buyers - something that is not practical in tradional media.

21_blue

WebmasterWorld Senior Member 5+ Year Member



 
Msg#: 13012 posted 12:05 pm on Mar 28, 2006 (gmt 0)

darkmage, I don't work in print publishing but a sort-of-similar thought had occurred to me, that there are parallels between smart pricing and the real world.

What I'd thought about is the fact that, in adverts, there are sometimes statements such as "please quote reference xyz", sometimes incentivised with a discount. Presumably, these references are used for "conversion tracking" of marketing channels? Are they also used to influence pricing, eg: commission/kickbacks or future contracts, etc.?

passingthru

5+ Year Member



 
Msg#: 13012 posted 12:24 pm on Mar 28, 2006 (gmt 0)

Isn't it obvious what smart pricing is?

Google charges as much as it can get away with for adverts. Google pays out as little as it can to buy the advertising space. So the fraction it pays out depends on the alternative advertising choices you have.

So your payout is designed to be just higher than any competitor advertising system pays out for your type of site.

ncreegan

10+ Year Member



 
Msg#: 13012 posted 12:47 pm on Mar 28, 2006 (gmt 0)

We've been doing this for a few years, and it's the same thing every time.

This can be easy.

1) Listen to EFV, always.
2) Read what Google has to say about smart pricing [google.com]. Most publishers just don't get it. Nowhere do they say that actual conversion has anything to do with smart pricing. Of course it wouldn't be fair to give you reduced payouts while an advertiser tested a worse converting layout. That would make Google less money across the board. That's why it doesn't happen.

It's about the likelihood of conversion, and it's something you can usually control.

birdstuff

10+ Year Member



 
Msg#: 13012 posted 1:15 pm on Mar 28, 2006 (gmt 0)

Hardly. As I've had to point out many times, advertisers are the ones footing the bill for this party and they're the ones you have to keep happy at any cost.

This assumes the state of the contextual advertising market will remain static forever. It won't. Google's overwhelming dominance will wane in time as the market matures, and when that happens publishers will be the driving force in the industry. Advertisers have little choice but to run their ads, and the pool of active advertisers will always vastly outnumber the pool of publishers. Using sleight-of-hand techniques to pacify advertisers and shareholders might work in the short run, but it will come back to bite them in the ... - and probably sooner rather than later.

Nowhere do they say that actual conversion has anything to do with smart pricing.

You're right - because they know there is no accurate way to measure conversions. It's the guessing game they play that makes the algorithm perform so poorly.

21_blue

WebmasterWorld Senior Member 5+ Year Member



 
Msg#: 13012 posted 1:55 pm on Mar 28, 2006 (gmt 0)

birdstuff wrote:
they know there is no accurate way to measure conversions

I see the issue slightly differently, because there are ways to measure conversions with a reasonable degree of accuracy. I see the problem as one of subjectivity.

As an Adwords advertiser, I can track my conversions with a high degree of accuracy. My 'definition' of conversion is someone who goes beyond the landing page through to a certain part of the site that I'm trying to develop. I get different conversion rates depending on which landing pages I promote in my adwords campaigns. That information is accurate and useful because it helps me develop and improve my landing pages and site structure.

The real problem is that the conversion data is subjective, subject to the definition I choose of conversion. This is what makes the system open to abuse/manipulation, though Google could counter this subjectivity by using 'normalisation' techniques. Perhaps they do, I don't know, but my experience of Adwords suggests not.

passingthru

5+ Year Member



 
Msg#: 13012 posted 2:10 pm on Mar 28, 2006 (gmt 0)

It's about the likelihood of conversion, and it's something you can usually control.

I think it is about the likelihood of conversion, but not in the way you think. Higher converting sights have more advertising options, they can use affiliate advertising if they are a review site so Google pays them more to outbid affiliate advertising money.

Google's overall advertising payout % has remained the same over the years, but the large publishers like AOL have been able to negotiate much better deals.

If Google has paid them more then it must be paying the smaller publishers less to keep the same approximate payout.

Therefore it's very simple, Smart Pricing must be pricing the payout down to maximize the profit to Google. Since Google makes its money on the difference between the buy and sell price.

This 42 message thread spans 2 pages: 42 ( [1] 2 > >
Global Options:
 top home search open messages active posts  
 

Home / Forums Index / Google / Google AdSense
rss feed

All trademarks and copyrights held by respective owners. Member comments are owned by the poster.
Home ¦ Free Tools ¦ Terms of Service ¦ Privacy Policy ¦ Report Problem ¦ About ¦ Library ¦ Newsletter
WebmasterWorld is a Developer Shed Community owned by Jim Boykin.
© Webmaster World 1996-2014 all rights reserved