How Smart Pricing Effects AdSense (TM) Publisher Revenues

I constantly receive phone calls from clients, prospective
clients and reporters asking the same question – what percent of
the keyword price does Google pay AdSense (TM) publishers. While
the AdSense Standard Terms and Conditions explicitly forbid
disclosing such information, the range I often give is 20% to
50% based on numerous conversations I have had with AdSense
publishers.

While the precise percentage is not clear, what is evident is
that the percentage that Google pays publishers has gone down
significantly since April 2004. It was at this time that Google
announced it would be lowering the price of ads (i.e., charging
AdWords(TM) clients less) that appear on the sites of AdSense
publishers. Susan Wojcicki, Director of Product Management for
Google, stated that this change came from requests of
advertisers who wanted different pricing on clicks from search
and content ads.

Google stated that it considered search-based ads more targeted
than content ads, and that they therefore generated more clicks
and revenue for advertisers. However, Google did realize that
some content ads perform as well as search-based ads. As a
result, “Smart Pricing” was born.

Smart Pricing adjusts the value of clicks based on a number of
factors such as time of day, type of content, and conversion
tracking. The latter, conversion tracking, measures how often a
click on an ad produces a desired action for the advertiser,
such as a product sale, newsletter signup, etc. The example
Google gave for Smart Pricing was that “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.”

While web forums are filled will AdSense publisher complaints
about Smart Pricing, it is actually a fair system – publishers
get paid based on the quality of the traffic they provide to
Google advertisers.

While the switch to Smart Pricing has decreased revenues for
many AdSense publishers, there is still a massive opportunity to
generate significant revenues via the AdSense program. The key
is to identify valuable/expensive keywords, attract qualified
customers to your site, and provide compelling text that gets
visitors really interested in a product or service. This will
ensure that the visitors click on the appropriate AdSense ads
and buy that advertiser’s product or service. A true
win-win-win.

About the author:
Dave Lavinsky is the President of TopPayingKeywords.com, a firm
which tracks and publishes databases of the 15,000+ most
expensive PPC keywords. www.toppayingkeywords.com