Does Low CTR Really Cause Adsense Smart Pricing?

Posted on January 24, 2008
Filed Under Adsense Tips |

I kept hearing about Adsense Smart Pricing but like most bloggers who make money with Adsense I didn’t know exactly what it was. Then in the last couple of weeks I had an experience which caused me to look further into it.

Like a lot of things to do with Google there seems to be plenty of opinion and speculation floating about, but little in the way of confirmed facts. As far as I can tell, smart pricing occurs when Google applies automatic price adjustments to certain clicks from content publishers. The idea is that publishers who provide clicks which don’t convert well will make less money per click. Google’s stated goal with smart pricing is to improve advertiser ROI.

How Do You Know If You’re Being Smart Priced?

When a publisher is smart priced, the money made per click from all clicks on an Adsense account will reduce dramatically, regardless of which website the clicks are coming from. This means that even clicks from your sites which have a history of making more money per click will drop in value.

What Causes Smart Pricing?

Most people believe that a low CTR will lead to your Adsense account being smart priced. While this never made much sense to me, it seemed to be generally accepted and I figured it must be true. But I had an experience recently which caused me to question the relationship between CTR and smart pricing.

My Experience…

Recently my overall click through rate dropped significantly below 1%. This was due to a single post on one of my other blogs reaching the top spot in Google for a topical search term. Although my post had targeted this term, it was completely off topic for my blog. As a consequence, the post was not well optimized for Adsense and therefore didn’t receive particularly relevant ads. This burst of traffic only lasted for a few days, but pushed my CTR through the floor.

Now according to what I had read, this is when smart pricing should kick in. However, what I observed was that while the value of the few clicks I got on that blog were very low, the clicks I was getting on my better paying blogs still paid well. From what I had read, if I was being smart priced, I should have made less money per click across all of my blogs. This clearly hadn’t happened.

I then came across a post by Stephen Cronin at his More Than Scratch The Surface blog. In How To Avoid Adsense Smart Pricing On Blogs Stephen does a great job of pulling together a whole bunch of information about Adsense Smart Pricing (and he’s a fellow Aussie as well…). Importantly he concludes that conversion rates for advertisers are more of a factor in smart pricing than CTR is.

This is certainly borne out by my recent experience. And it makes more sense as well. Why would Google care how many impressions it takes to generate a click on an ad? If Google really want to improve advertiser ROI then conversion rate rather than CTR would be a far better measure.

So How Is CTR And Smart Pricing Related?

There may still be a relationship between CTR and smart pricing, although not a causal one. What if the root cause of both low CTR and smart pricing was poorly targeted ads?

Poorly targeted ads would certainly lead to a lower CTR. If you arrived at a website looking for information about how to make money blogging, you would be more likely to click on an ad about making money than one about blogging.

And these poorly targeted ads would probably lead to lower conversion rates for advertisers as well. If we assume that the how to make money blogging reader did click on a blogging ad, they would be less likely to buy a product or service from the advertiser than someone who was looking for blogging information to start with.

I should stress that my experience is an isolated one and by itself doesn’t prove anything. Maybe my CTR wasn’t low enough for long enough. Maybe I’ve been smart priced in the past and didn’t notice - certainly some of my early efforts with Adsense made very little money. I would be curious to hear views from other bloggers on Adsense smart pricing. Are you, or have you been smart priced?

Technorati Tags: adsense, ctr, Make Money Blogging, smart pricing




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Comments

3 Responses to “Does Low CTR Really Cause Adsense Smart Pricing?”

  1. KiwiPulse on January 24th, 2008 6:07 am

    Personally, I think google Adsense is looking more for relevant ads about your topics than the highest payout ads. Since I’m using adsblacklist.com it eliminated some of the ads LCPC (low cost per click) sites. :D

  2. Brett on January 25th, 2008 12:39 am

    Yes, I’ve experimented with adsblacklist as well. It seemed to help a bit - especially in the make money blogging niche.

  3. Make Money Online | David Elefant on February 10th, 2008 5:05 am

    I have read about smart pricing of adsense a few times now on various blogs. But it seems to be an urban legend. I can’t find anything about it directly written by Google.

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