The biggest challenge in front of Google Adsense was Click Fraud. To save itself and the advertisers from Click Fraud, in 2004 Google introduced Smart Pricing. Under Smart Pricing the CPC (cost per click) value of an advertisement by Google is not fixed but is decided by a variety of factors, the most important one being the conversion rate of the clicks (that is the number of clicks resulting in online sale, registration, phone call, newsletter sign-up etc).
In simple words if Google notices that clicks on a certain advertisement (on a particular website) are not converting into customer action like sales etc, Google will reduce the CPC of clicks on such ads. If clicks continue not to convert then Google can reduce the CPC value of such clicks to the minimum. This means that if the CPC value of the ads on your site is $ 7.45 but the clicks on these ads are not converting then Google can reduce the CPC value of such clicks to as low as $0.03.
What it means for people who do Click Fraud?
BAD NEWS!! Very, very, very Bad News. You can keep clicking on the Adsense Ads on your website/blog and Google will keep reducing the CPC value of your ads. You can make 100 clicks on your ads but you will earn only about $ 3 for those 100 clicks, as the minimum CPC for Adsense ads is $0.03.
Adsense has evolved and to make money from it, the webmasters too will have to evolve. Now you can't make money from Adsense by making low quality sites and involving in tactics like Click Fraud. The message is clear, make high quality sites with great content, bring in targeted traffic and Google Adsense will reward you for it, make low quality sites and practice Click Fraud and you will earn in cents and ultimately be banned.
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