What determines smart pricing?

[DeROK]

Does anybody know what exactly what determines smart pricing? Obviously a more established site will receive a higher payment for a click, but what else is involved?

Is it a page's CTR? Is it the percentage of clickers that actually convert to a sale? Or is it a combo of both?

I was just curious. Is it better, for example, to have 500 visitors where only 10 click on ads and 8 people convert. Or to have 40 people click on ads and have 5 people convert?

[david_uk]

I don't think anyone actually knows the answer here. I think there are many factors involved, not only visitor behaviour on your site. Remember that it's a dynamic auction on the adwords side, and that factor alone will vary earnings hugely without smartpricing being involved.

[dollarshort]

My Opinion, Smart pricing is the advertiser pays 2 cents more than the next highest bidder for a keyword, even if his/her bid is much higher, if a middle bidder drops out all above him come crashing down, good for advertisers bad for publishers. I do not believe its based on sales conversion, there are too many variables involved, such as not everyone tracks sales, what about a poorly designed website that cannot convert, why should the publisher be penalized?

[21_blue]

Is it better, for example, to have 500 visitors where only 10 click on ads and 8 people convert. Or to have 40 people click on ads and have 5 people convert?

David's right that no one really knows, to some extent we're trying to see what's in the picture with a blindfold on.

The statistics from my site suggest to me that:

• CTR doesn't have any impact on smartprice
  
  
• overall earnings will probably be higher with your first option (low no of clicks, high no of conversions), providing it is a long term trend

With the relative proportions of clicks you are suggesting in your two examples, there may not be a lot in it for that particular page, but there will also be an element of smartprice that applies across the site/account. Therefore a page with a high no of clicks and low conversion will probably be dragging down the performance of other pages, not just that one.