The Truth about Smart Pricing

From the horse's mouth. Google themselves:

Link

 

*[Warning]* - Long Rant

I have always subscribed to the notion that, for most people, researching and experimenting with adsense alternatives is an exercise in futility. I have tried other programs in the past, and nothing else compared to the earnings and simplicity of Adsense. My opinion is changing on this subject, and I get the feeling that other webmasters are feeling the same. Will these alternatives prove to be better earners on avg? Maybe so, maybe not.

My point is that I never even considered looking for an alternative to adsense before my CPM got cut in half recently, my top site got wiped out from Google SERPS, and I haven't heard back from Google about anything (not even a canned auto-response in over 4 weeks so far). Roughly 95% of my main site's top 200 rankings disappeared on Sept 22nd. I have submitted two "Reinclusion requests" to Google (via the Matt Cutts recommended method). Very polite, relevant information included - yet absolutely no response. These things do not build brand loyalty. I have been an enthusiastic Google user, investor, and publisher up until now. That's starting to change, and I honestly never forsaw that happening.

I am on track to earn $50k via Adsense over the next 12 months, and spend $5k+ on Adwords. That is pocket change to Google. However, what % of their total revenue is from small publishers like myself and others in this forum?

In the last few months I had reached the point with Adsense where I could make a comfortable full time living out of it (hoping to soon quit my dayjob and develop sites full time).

On my top earning site I still have all the exact same advertisers as the last year (niche market, mostly static companies). Yet my CPM and overall earnings are both down about 50%. It's disappointing. Yes, it's possible that the number of competing publishers increased dramatically in a few weeks, though it is highly unlikely according to my research.

Even factored in for these rankings drops, my earnings per click is still down roughly 50% on my top site, and significantly for all others.

Reading the latest Adsense blog post from Google means nothing when my earnings have just plummeted, it is insufficient. Essentially I am hearing "Don't worry, at any time your earnings may be drastically cut a few months or years. We're trying to build advertiser loyalty for Google. Is that Cool? Super. Please remember, in the long run this will lead to fantastic long term relationships between Google and our big dollar Advertisers." Hmm, NO. I would prefer that my advertising partner not cut MY pay so that THEY can maintain and/or improve their relationship with the advertiser. I will look into alternatives, or try to work directly with relevant advertisers.

That's my editorialized version, here's Google's statement from their blog:

Even though it's a "blog", it is still a representation of Google. To me it sounds like vague political BS. How about addressing this question Google - "Why am I getting paid 1/2 the amount for the same click?"

 

Very sharp, seo.

 

Very impressive, how long did it take you to reach that figure?

 

It is just political jargon. If you read it carefully the bottom dollar is the money. More clients = more money. Lots of companies undersell their products in hopes that they'll make more sales on the accompanying products. Initially printers were at a price that only offices and companies could afford, producers began subsidizing the cost of the printer and raised the price of the ink. Practically everyone has a printer now, and is constantly buying the ink when it runs out for at times 70$ a pop. The printer is cheaper than the ink.

Google of course is a company and they're looking to increase their margins of profit. Whether that be indirectly by allowing more people to access their services and 'feel' that Google is a good company, they're making more money in the long run or 'Smart Pricing' would have never have gone forward.

 

Good info, I remember a thread where someone said their earnings went down whenever they added a new channel - could this be due to smart pricing?

I don't think Google would penalize your overall account based on bad performance by one site.

 

That's right. They don't smart price an entire account. I have one site that has keywords up to 10 times the value of my other sites. If my whole account was smart priced, I'd be getting just 10-20c clicks from there too.

 

While your particular site may not have been smart priced, the last 2 posters are factually incorrect. They do smart price an entire account.

 

That person would be me. And yes, they smart-price the entire account! That's why I am using YPN for all new sites.

 

Smart pricing needs to be seen in two ways. Firstly from an advertiser's perspective: You pay money to advertise on websites, in the hope to get people to buy a product/use a service you provide. In order to make it profitable for you, you need the people that click on your ads, to actually convert. So if you get high conversion you are more likely to keep using the network and ultimately pay more, because you get a nice ROI.

From a publisher's perspective. You created a site to provide useful information/service etc. related to a certain topic. In order to finance the site you have put up Adsense ads and they display ads on the topic you chose. Ideally people that come to your site is very much interested in the topic, and more willing and likely to convert for your advertisers. Your advertisers are happy and you are happy because you get paid.

That's the principal of smart-pricing. And it isn't a bad thing....

Smart-pricing will definitely start to benefit the advertisers and publishers in the long run. I think the unfortunate people will be those creating websites purely to cash in on high-paying keywords, and provide no real value to the visitors. A visitor that frequent a site and find a site useful is FAR more likely to click on ads and actually buy something from the advertiser.

 

Crusader,

You are parroting Google's marketing. The theory is nice. The reality is that smart pricing works against quality sites and for the spam sites. It has created a cottage industry of spam sites actually.

 

I'm not parroting anything. To tell you the truth I haven't even read the Google press release in totallity so it hasn't influenced me. I just tried to figure out why they would be using smart pricing, and that's what I came up with.

 

I have heard this before and I have no idea where anyone would get that idea. Do you think spam sites would do better conversion-wise? That's the only way they would benefit from smart pricing.

 

Crusader,
Sorry I didn't mean that as bad as it came out. You are right it should work that way.

Toivo,
It is easy to show this is the case. Have you installed the adsense preview tool? If so, preview whose sites advertise on your sites. Click the ads and count how many are from merchants and how many are from spam sites created to earn money from adsense. How can a site built for adsense earn enough money to pay for adwords on your site and still cover Google's commision? The only way is if (due to smart pricing) they are able to earn more per click than you do. If smart pricing was working correctly, the spammers would be losing their shirts. Instead they are making so much money that they have to incoporate company after company to rake in the dough and not jeapordize their cash cow. There is an 11 page thread about that.

 

OK, I did exactly as you suggested. I went to three of my sites, all in different industries, and used the preview tool. Out of the 35 sites (one URL didn't show properly for some reason) I got no spam sites.

Even if I did find spam sites this theory still makes no sense to me.

Maybe its an assumption I have. My assumption is that clicks from spammer sites would have lower conversion than high quality sites would have. Therefore smart pricing would hurt them. From what you are saying, you seem to think that clicks from spammer sites would convert better than clicks from your own sites. That's the only way smart pricing would help them.

If I understand it correctly, the way these spammer sites can make money off of AdWords/AdSense arbitrage is by buying keywords that have very low bid prices and having their pages targeted for high paying keywords. As an example let's say "yellow monkeys" is a hot keyword in AdWords and goes for $10 a click. You make a page about "yellow monkeys". To do arbitrage you have to look for relates keywords that aren't popular. Maybe you bid on "jaundiced primates" instead, and these click only go for 10 cents a click. If you only pay 10 cents a click, but get payed many dollars a click, it pays off. The spam sites end up getting good CTR because there is really nothing else to do at the site.

 

In my industry which is a pretty expensive one, about 30-40% of the advertisers are spammy sites built only for adsense. And they aren't targetting less expensive keywords. They are competing head to head in the same keywords. But they know adwords inside out and somehow manage to get better rates on their ads than the average advertiser.

I don't honestly know how they do it. I spent a week fooling around with adwords to figure it out, but I think much more analysis is needed than that. You need to really track it carefully to figure it all out.

I tried to replicate with a site that had expensive keywords and target less expensive words and sites and it was not a winner. If you don't know the algo you can't do squat.

But there are guys out there week after week paying for traffic only to make money on the other end with a site made for no other purpose than adsense clicks. They'd have been out of business months ago if google would have listened to their spam reports or if they had a system to stop the spam.

Actually I did figure out a way to fool the algos. But it would entail cheating. Something spammers don't mind doing.

 

Could give me a URL that would allow me to run the AdSense preview tool and see some of these spammy sites? Or maybe even some keywords? I'd love to see some actual examples of this.

 

There is only one driving factor and that is ROI. If I spend $10 on advertising and make $20 in profit, then I will spend more money with that type of advertising. If my keywords become more competitive, then I keep upping my CPC until the point where my profit is only 10%. At that point, there is no benefit in paying more. It's sad, but the market is defined by advertising. People buy what they see ads for. I could take a dump in a box, and sell it as long as I can afford ads for it.

 

The part that is still a little fuzzy for me is how is Google able to track conversions?

Sure, they offer Adwords users a conversion tracking tool, but what percentage of advertisers are using it? How can Google extrapolate the data to all types of sites?

The only advice we got is not too remove ads from low CTR pages, since these MAY be high conversion rate pages. What we need is for our stats in Adsense to show Conversion rate, as well as CTR and all the rest. No?

 

donnareed,

I was thinking along the same line. If a visitor click on an ads on Monday, but she decides to bookmark and only purchase on Friday, what kind of income we're looking for such click?