Friday, October 28, 2005 | 12:32:00 PM
We've noticed a lot of talk recently about the phenomenon commonly referred to as 'smart pricing'. There are some misconceptions out there about this, so we wanted to provide a few facts about smart pricing and how to ensure you're maximizing your revenue.
1. Many factors determine the price of an ad
More than conversion rate goes into determining the price of an ad: the advertiser's bid, the quality of the ad, the other ads competing for the space, the start or end of an ad campaign, and other advertiser fluctuations.
2. Clickthrough rate doesn't affect advertiser return on investment (ROI)
The percentage of clicks that convert for an advertiser is the most important factor in an advertiser's ROI, so it's not only possible, but common, to have a low CTR and a high advertiser conversion rate. It's also possible to have a high CTR and a low conversion rate. Don't remove the AdSense code from your site just because it has a lower CTR - it may be one of your best converting sites.
3. Google doesn't make money from 'smart pricing'
In fact, we make less money, since the cost to advertisers is reduced in order to provide a strong ROI. Ultimately, this leads to higher payouts for publishers by drawing a larger pool of advertisers and rewarding publishers who create high quality sites.
4. Remember the old chestnut: "Content is King"
The best way to ensure you benefit from AdSense is to create compelling content for interested users. This also means driving targeted traffic to your site -- advertisers don't gain as much ROI when paying for generic clicks as they do for quality clicks that come from interest in your content. Good content usually equals a good experience for user plus advertiser, which can be much more valuable than CTR.
Keep in mind that like most Google technology, our system for calculating advertiser pricing gets updated regularly. We're constantly improving our ad products to benefit both the publisher and advertiser communities; what benefits one side ultimately benefits the other.