What is Smart Pricing?
Smart pricing was introduced by Google a few years ago to deliver better value for advertisers. In terms of it’s mechanics there is precious little information and plenty of educated guess work.
Google’s own announcement gives some insight:
“We are introducing automatic price adjustments for certain clicks that you get from the Google Network. Google’s smart pricing model has always provided better placement for better performing ads and reduced the cost of a click to the least amount possible to stay above your competitor’s ad. Now, with no change in how you bid, Google may reduce the cost for a click if that better reflects the value it brings to advertisers like you.
How smart pricing works
We are constantly analysing data across our network against a variety of factors. If our data shows that a click is less likely to turn into business results (e.g. online sale, registration, phone call, newsletter sign-up), we may reduce the price you pay for that click. You may notice a reduction in the cost of clicks from content sites.
We take into account many factors such as what keywords or concepts triggered the ad, as well as the type of site on which the ad was served. For example, a click on an ad for digital cameras on a web page about photography tips may be worth less than a click on the same ad appearing next to a review of digital cameras.
Google saves you time and hassle by estimating the value of clicks and adjusting prices on an ongoing basis. With improved smart pricing, you should automatically get greater value for clicks from ad impressions across our network, all with no change in how you bid.”
The key points from this and other commentators on this subject are as follows:
1. Relevancy is key. The more relevant an ad is to the content it sits in, the more likely it will generate business for the advertiser. Google takes this into account when charging the advertiser.
2. Site popularity e.g page rank, page impressions. inbound links and probably outbound links.
3. Spammy sites are probably influencing Google to use age of site as a determinant factor.
4. Historic Click Through Rates.
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