What is Smart Pricing ?

Smart Pricing is a phenomenon through which Google determines the CPC value (Cost Per Click) of Adsense Ads on individual websites. Through Smart Pricing Google reduces the CPC of Adsense Ads on websites on which clicks on Adsense Ads have low conversion rates ( i.e. clicks on ads don't lead to online sale, registration, phone call, newsletter sign-up etc). Smart Pricing was introduced by Google in 2004 and since then a lot of webmasters and bloggers have experienced a dip in the CPC values of the ads on their websites resulting in lower Adsense Revenue.

What is Smart Pricing?
What Smart Pricing means for Website Publishers/Bloggers?
How to survive Smart Pricing?

What is Smart Pricing?

Smart Pricing is an attempt by Google to provide more ROI (Return on Investment) to people who advertise through Google Adwords.

Google earns a major chunk of its money from ADWORDS publishers and to show these publishers that Google values their money it has introduced Smart Pricing. Under Smart Pricing, Google analyzes data across its Adsense network, and if this data shows that a click is less likely to turn into business results (e.g. online sale, registration, phone call, newsletter sign-up), Google reduces the price the Adwords Publisher has to pay for that click.

What Smart Pricing means for Website Publishers/Bloggers?

Smart Pricing spells TROUBLE for a lot of website publishers/bloggers. Since Smart Pricing is designed to reduce the CPC of Ads on which clicks don't convert, a lot of webmasters have experienced a significant decline in their Adsense Revenue after their sites got "Smart Priced". Smart Pricing is even more critical for Webmasters as Smart Pricing does not effect just one individual webpage or website but and entire Adsense Account. This means that one poorly converting site can result in the smart pricing of an entire adsense account (i.e. the CPC of Ads on all your websites in that Adsense Account will be adversely affected).

I would like to mention here that Smart Pricing only hurts websites with poor Content; websites with high quality content will actually be earning more money because of Smart Pricing.

How to survive Smart Pricing?

There are only three ways of dealing with Smart Pricing:

1) Remove the Adsense Ads from websites/blogs that have a low conversion rate. This will minus the Adsense Revenue from low converting sites, but your overall Adsense Revenue will boost up very significantly as the CPC value of Ads on your other sites will improve manifolds after removing the Adsense Ads from low converting sites. Many webmasters say that their Overall Adsense Revenue doubled after doing this.

2) Get a separate Adsense Account for low converting Websites.A lot of webmasters have created multiple Adsense Accounts to save their high converting websites from being smart priced because of their low converting sites.

3) Make Niche Blogs with "High Quality Content". A Niche Blog will ensure that you get "targeted traffic" which will lead to a higher conversion rate for your website.

http://adsense.blogspot.com/2005/10/facts-about-smart-pricing.html