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Smart Pricing Questioned



4:44 pm on Jul 15, 2005 (gmt 0)

10+ Year Member

Hi - as a brief intro, i've been a member of WW for years (attended pubcon last year at vegas etc), but lost my password about a year ago, and hadn't bothered to reregister - so have finally registered a new account.

I still spend at least an hour reading WW every day, so have kept up to date with all your postings.

What i'm interested to know is the criteria and factors that google use to implement a smart pricing penalty.

I had a thought a few weeks ago, that adwords advertisers could be manipulating the system to get cheaper clicks, and I want to explore whether this is possible. (hopefully not)

As far as I understand, smart pricing only comes about by google analysing the traffic that adsense publishers send to google adwords advertisers that are USING google conversion tracking.

Out of those advertisers, does google look at the traffic from the adsense publishers to each one of these advertisers on an individual URL level, and then determine out of all the traffic from adsense publishers, which of those publishers should be penalised as the traffic they are sending to the google advertisers is not converting relative to the other adsense publishers.

If this is the case, and hopefully Adsense Advisor can confirm this, then my scenario below doesn't exist. In this case, the reason for conversions from adsense publishers traffic being lower could be one of 2 things:

1. That the traffic they get to their site and thus pass on is not targetted enough / high enough quality for the advertisers on the site.

2. That the adverts which google is serving on the adsense publishers site are not targetted enough, and thus the clicks aren't of a high enough quality. (although the traffic might be of a high quality the visitor is clicking on an advert which isn't targetted enough).

However, if any other equations / calculations / algo's are used to calculate smart pricing which doesn't compare only adsense publishers against each other on specific sites, then the google adwords advertisers have the potential to manipulate the smart pricing for their benefit.

I won't go into in depth detail with my thinking until I hear the reply's, but if the conversions are compared across advertisers (on the google adwords side) or other methods which don't only compare adsense publishers against each other, then the google adwords advertisers could manipulate the results in order for the smart pricing to kick in and get cheaper traffic.

As an example, a google adwords advertiser can add conversion tracking code to their site, but only on one payment gateway (where they use 2), (and perhaps use 3rd party tracking code for correct tracking) or taking a large percentage of conversions offline (via telephone, email sales etc). This would result in the conversions being lower than they should be, and the adwords advertiser would start receiving cheaper traffic (intentionally or unintentionally).

Can anyone clarify if the smart pricing is ONLY based on the comparison of the different adsense publishers that send traffic to an adwords advertiser, or if any other factors come into play?


4:52 pm on Jul 15, 2005 (gmt 0)

10+ Year Member

It was my understanding that smart pricing was a result of comparison of conversions from your site vs. conversions from the Google Search Network.

This is how I have imagined it works.

Say that conversions on the Google Search Network were given a value of 1. If the conversions from the ads that run on your site converted at 70% of the Google Search network, you would be given a smart pricing rating of .7 and that would then be applied to the CPC of the adwords advertisers so their rates to advertise on your site are less (and you get a lower Revenue per click).

But that is just my guess...


4:58 pm on Jul 15, 2005 (gmt 0)

10+ Year Member

So you're saying that adsense publishers are compared against the search network, and not against each other (the content network)?


5:13 pm on Jul 15, 2005 (gmt 0)

10+ Year Member

That is how I thought it worked, but I could be wrong!


5:21 pm on Jul 15, 2005 (gmt 0)

What i'm interested to know is the criteria and factors that google use to implement a smart pricing penalty.

Smart pricing isn't a penalty. It's an advertiser discount based on the anticipated likelihood of conversion (a.k.a. a "business action," which could be a transaction, a registration, a request for information, or whatever else the advertiser has defined).

Google doesn't spell out the details of how it determines smart pricing, although the initial explanation in April, 2004 did use the examples of:

- A product review of a camera (more likely to convert)

- A page of photo tips (less likely to convert)


10:22 pm on Jul 15, 2005 (gmt 0)

10+ Year Member

discount for google advertisers = penalty for adsense publishers :)

so i now have 2 different opinions on how the discount is applied:

1. adsense publishers traffic is compared against search standards
2. adsense publishers are compared against an industry / product standard that google has compiled

if no one in this forum (who i would consider in the top tiers of adsense knowledge) know for certain what reasons / standards are causing the discount to be applied, then there is a chance that the shrewd adwords marketers have discovered how to use the discount to pick up the clicks cheaper.


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