Last week, in the first half of our series designed to help you better understand your earnings, we introduced you to the ad auction for AdSense for content. To recap, eligible ads compete to appear on your pages; our ad auction determines which ads show, and how much you can potentially earn from them.

Now, let’s talk about smart pricing, a tool designed to help advertisers bid efficiently and effectively on many publishers’ ad auctions at once. Our Chief Economist, Hal Varian, explains the purpose of smart pricing, how it plays a role in the ad auction, and how it benefits the entire advertising ecosystem of publishers, advertisers, and users.

Although we aren’t able to provide detailed explanations of our algorithms, we’d like to address a common misconception and show that smart pricing isn’t intended to be a ‘punishment’ for publishers. It’s designed to increase advertiser confidence in AdSense sites by helping them set more accurate bids that reflect the business results they’re looking for. This then allows advertisers to increase their maximum bids, which ultimately helps publishers earn more in the long run.

We’ll let Hal explain the concept of smart pricing in more detail:




Finally, we’d like to take a moment to address some of the questions we’ve received about the relationship between smart pricing and the AdSense for content revenue share. Smart pricing can impact which ad wins an auction for a particular content page. However, since the revenue share is fixed for all publishers, smart pricing doesn’t impact the percentage you actually earn for a valid click. Any changes to advertiser bids as a result of smart pricing will proportionately affect the amount both Google and the publisher earn.

Thanks for following our two-part earnings series. We hope you found the content useful, and that you now have a better understanding of the factors that influence your earnings.

Posted by Arlene Lee - Inside AdSense Team