Forum Moderators: martinibuster
In a nutshell, smart pricing is a sliding scale of discounts for advertisers based on the likelihood of a click convertsing into a sale or other business action.
In other words, if the advertiser's nominal bid is 50 cents, the advertiser might pay only a nickel, a dime, or or a quarter per click from a site that, according to Google's statistical modeling, isn't likely to convert terribly well.
(The above numbers are purely hypothetical; Google doesn't reveal the inner workings of smart pricing for obvious competitive reasons.)
Some publishers get upset by smart pricing because they're hurt by it; others aren't much affected and take it in stride.
If my CTR was better...i'd be getting more $ per click?
I always thought the more clicks I can get from my site the better?
If my CTR was better...i'd be getting more $ per click?
Unlikely. In fact, the opposite could be true if CTR were at the expense of conversions.
I always thought the more clicks I can get from my site the better?
The better for you, maybe, but not necessarily the better for advertisers. Let's say that you design your pages so the AdSense ads look like navigation bars. Your clickthrough rate will increase, but the conversion rate for advertisers is likely to drop. This means your clicks are worth less to advertisers--and that you're a prime candidate for a hefty "smart pricing" discount.
The reason many don't like smartpricing is not because of the reason it was introduced, as that's perfectly fair. The idea being that if a click didn't convert for an advertiser, they got a discount. Advertisers need encouragement to participate in content - that's your site (and mine before I removed the code), and it was felt that smart pricing would encourage them to participate.
The trouble with smartpricing is that a) many see it is mainly being a method for Google to cream off more profit by discounting the publishers price heavily, and only passing on a small discount to advertisers and b) the fact that "Statistical modelling" translates to pure guesswork. In reality, Google mainly don't have a clue as to what really converts, so resort to guessing. People understand that a click is dicounted because it genuinely didn't convert, but have a real problem if the click is dicounted purely on the basis of guessing, or simple profeteering, knowing that the discount on a click won't have been passed back to the advertiser.
As an advertiser, I never actually saw a smart pricing discount - not even once. Maybe you need to have a big enough account to be able to shout loudly at them first - who knows. But that's veering away from your question.
The other point is that many advertisers don't use conversion tracking (telling G what you regard as a conversion). The reason I never used it as an advertiser is simply because I know that smartpricing is pure guesswork - telling them what I regard as a conversion probably means that they would then charge me more for a click knowing it was a conversion. If they are fumbling round in the dark and guessing, they might be charging me less per click. I understand that many advertisers don't use conversion tracking for a variety of reasons - this being one of them.
So you can't really do a lot about RandomPricing(tm) apart from learn to live with it. The best thing you can do is to concentrate on providing top quality content that people will want to see, and doing your best to increase your position in the search engine rankings.
The reason I never used it as an advertiser is simply because I know that smartpricing is pure guesswork
"Statistical modeling" would be a better way of putting it.
In the absence of any specific data as to if a click converted or not, the best statistical modelling can ever be is guesswork.
Call me a newbie, or call me an idiot, but what exactly is SMART PRICING?Smart Pricing is what you yell at when your current stats do not match the best day you ever had. It is the boogeyman that takes your pennies when you don't understand that adsense fluctuates wildly on it's own for thousands of reasons. It's a known fact to many people that it kicks in when your ctr goes down and it kicks in when your ctr goes up. It's one of the many ways that the people that give us free money conspire to make our lives miserable and keep what is rightfully our entitlement.
Judging by what I've read here ;)
Personally I don't worry about it too much.
Personally I don't worry about it too much.
I noticed that when I had unusual traffic spikes, it used to whack me heavily, and when the spike was over it would whack me again as I wasn't getting the clicks I was during the spike!
Hmmmm...that's it! Happening to me now :( Earnings so low it's like being back in time w/ the first few months with Adsense...arggghhhh!
In the absence of any specific data as to if a click converted or not, the best statistical modelling can ever be is guesswork.
We'll have to agree to disagree, then. But the bottom line is that Google is a company whose business is built around algorithms--or "guesswork," if you prefer--and publishers who can't live with that reality will be much happier somewhere else.
That said, this is a discussion forum, so along with explaining what it is, why it was brought in (as I said in my first post in this thread) it's also relevant in the adsense forum to explain why adsense publishers don't like smart pricing.
Yes, Google will always use algorithms, but it also has to be said that they most certainly aren't flawless. Posters here should be able to discuss the many quirks and flaws in the system. Google monitors this forum, and the feedback here may be used to enhance the system in some way. I for one don't think that this should be stifled.
As to what you wish to call it, call it what you will but the facts remain the same. Smart pricing is based on a whole series of assumptions on how ads perform elsewhere on the network. These performance indicators are mostly assumtions themselves.
Let me give you an illustration about data modelling. We live near the entrance of a harbour. It has to be dredged once every couple of years so that shipping can get in and out. The authorities have been heavily investing in what they hoped would be a permanent solution over the last 10 - 15 years. They have studied tides meticulously, mapped the seabed for miles around and developed software to simulate all eventualities. They eventually placed rock groins in certain places, and piled up many many thousands of tons of dredged sand on the beaches. Guess what happened? The work was complete at the end of last year, and the sand has simply washed back to where it was, and they have gone back to dredging the channel every couple of years.
With that model, they knew many of the variables such as the tides, seabed etc etc etc, and it didn't help. Smart pricing has no clue as to what advertisers regard as a conversion in many cases, so they don't actually have ANY reference points on which to base assumptions. The tides example at least had something to go on.
Therefore whilst Google might like to state that it works, the reality of it is that it's assumptions based on assumptions, and many feel it's only TRUE purpose is to maintain a price differential between what discounts they give advertisers, and what they pay publishers in order to maximise Google's profit. As business decisions go, that's perfectly reasonable.
it's also relevant in the adsense forum to explain why adsense publishers don't like smart pricing.
Correction: Some AdSense publishers don't like smart pricing. Others realize that, without smart pricing or something very much like it, AdSense ads would be much less attractive to advertisers who are leery of the one-size-fits-all, buyer-take-potluck, eat-the-crap-along-the-caviar nature of the "content network."
Plus, the decline in revenues that some publishers attribute to smart pricing may not be related to smart pricing at all. Depending on the individual case, they could be the result of changes in supply and demand or a "quality score" mechanism in Google's compensation formula.
In the final analysis, the publishers who don't like smart pricing are the publishers who think they've been hurt by it.
Correction: Some AdSense publishers don't like smart pricing.
OK - I'll give you that one :)
Others realize that, without smart pricing or something very much like it, AdSense ads would be much less attractive to advertisers who are leery of the one-size-fits-all, buyer-take-potluck, eat-the-crap-along-the-caviar nature of the "content network."
But smartpricing isn't universally loved by advertisers either. I didn't say that it (or something like it) wasn't necessary. Merely making the point that people rightly have mixed feelings about it. It is a discussion forum after all, and not a broadcast on behalf of Google.
Plus, the decline in revenues that some publishers attribute to smart pricing may not be related to smart pricing at all. Depending on the individual case, they could be the result of changes in supply and demand or a "quality score" mechanism in Google's compensation formula.
QS isn't hailed as a success. I'd like to see it work - I've said that all along, but so far there aren't that many positive signs. They have shifted the crap to content, and a new generation of scrapers seems to have emerged to replace the previous MFA's. Hopefully in time it will succeed. And yes, it's true that decline in income can be as a result of many factors as well as smartpricing. I don't think anyone has said anything other than that, and there doesn't seem to be any disagreement on this. Not sure why you mentioned it.
In the final analysis, the publishers who don't like smart pricing are the publishers who think they've been hurt by it.
In many cases that is inevitably the case, but personally I think that is over-generalisation. In my case, the income dropped off to the point where it became no longer viable to show ads because of the decline in advertisers. That's not a fault of smart pricing - nor could smart pricing save the advertisers either. If smartpricing worked as it's supposed to, the clicks made on mfa's would have been so heavily discounted that the advertisers would have paid virtualy nothing to appear, leaving their budgets intact for sites that did convert. Therefore they might have stayed.
I've had good days, and bad days, but I don't blame smart-pricing. Nor do I think they should pull the plug on it. I just don't think we have to be blind to the many faults of the system, or not discuss them either. All of us are equally entitled to our views, and no one publishers experience is more valid than any others experience in this forum.
[edited by: Scurramunga at 9:59 pm (utc) on Sep. 2, 2006]
The day we all pretend that all experiences are the same for all publishers and the day we stop discussing our views just because they may not conform to other views, is the day this forum will loose its appeal.
No one has suggested otherwise. However, if a member states a supposition as a fact ("I know that smartpricing is pure guesswork"), the member shouldn't be surprised or miffed if the statement is challenged.
No one has suggested otherwise. However, if a member states a supposition as a fact ("I know that smartpricing is pure guesswork"), the member shouldn't be surprised or miffed if the statement is challenged.
Oh, I'm not in the least bit miffed, shocked or surprised! I've said my piece, and note there is no counter-argument forthcoming. I can see where this is going, but don't have any desire to get dragged into a pointless, protracted discussion so I'll leave this thread here. The OP asked what smartpricing is. He's had the explanation and commentary from various perspectives - no real point in veering off of the question asked and re-hashing old posts indeffinitely.
David did say that he would rather not report conversions, as in the absence of any advertiser feedback to Google, subsequent evaluation made by Google regarding that conversions for that advertiser is guesswork by comparison.
[edited by: Scurramunga at 11:30 pm (utc) on Sep. 2, 2006]
David did say that he would rather not report conversions, as in the absence of any advertiser feedback to Google, subsequent evaluation made by Google regarding that conversions for that advertiser is guesswork by comparison.
"Guesswork by comparison" isn't the same as "guesswork."
In any case, Google has never said that smart pricing is purely the result of conversion tracking. That obviously wouldn't be practical, simply because (a) not all advertisers use Google's conversion tracking, and (b) the numbers recorded by a small advertiser or for a small publisher might not be statistically valid. To see what Google has said publicly about smart pricing, you'd have to go back to the newsletter that was issued at the time of smart pricing's introduction in 2004 (and which is still easy to find with a Google search).
I have always tried to follow this principle with my product/service site. I have pages that directly refer to my products and some pages containing general industry news. It is always the pages that directly refer to a specific product that perform best for me.
i also wanted to add that I do agree that smartpricing is probably based on a whole range of factors, or possibly factors we haven't nutted out here. Who knows? The only measure a publisher (working blindly as we all are) can take, is to ensure content is as relevant as possible attract the right visitor to satisfy the needs of advertisers.
[edited by: Scurramunga at 1:19 am (utc) on Sep. 3, 2006]
The only measure a publisher (working blindly as we all are) can take, is to ensure content is as relevant as possible attract the right visitor to satisfy the needs of advertisers.
I agree completely. The right audience can be as important as the matching of ads to keywords on the page--at least if we're to go by the example of offline trade and enthusiast publishing. (Would The Tire Rack sell as many mail-order tires and wheels with ads in USA TODAY as in CAR AND DRIVER? Would mail-order camera vndors sell as many cameras with ads in PEOPLE as they do with ads in POPULAR PHOTOGRAPHY? I don't think so.)
there is nothing much you can do about it
make sure that users only click out of pure interest in what the ad has to offer. don't trick them into clicking.
having said that, if you follow this advice, i still wonder why a click from a special review page should more likely convert than a click from a general interest site.
think about it this way: user clicks only out of interest. general interest site = less users click anyhow. that's called preselection. why should the remaining few clicks be worth less? admittedly, that's an everlasting mistery to me..
[edited by: moTi at 6:21 am (utc) on Sep. 3, 2006]
