One of the more difficult aspects of using AdSense is keeping up to date with changes that Google likes to introduce from time to time. Most of these changes are pretty minor. That doesn’t mean that you can ignore them — you will need to be aware of them. But you won’t usually have to make massive changes to your site and the way you’ve optimized your ads when Google adjusts its policy.
One change that did have a dramatic effect on publishers took place in April, 2004: Google introduced Smart Pricing. We’ve already felt some of its effects in this book. Now we’re going to explain exactly what it means...
First, let me just say that Smart Pricing was a pretty smart move, especially for advertisers. The principle is simple: before Smart Pricing, advertisers paid the price they had bid for each click their ad received on a website... regardless of whether that click resu lted in a sale. The result was that some advertisers were receiving large num bers of clicks — for which they were paying large sums of money — but were seeing only a low return on that investment (ROI).
Not surprisingly, they were drifting away to other ad distributors, particularly Yahoo!, in the search for visitors who wouldn’t just click but buy too.
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To improve advertisers’ ROI (and win them back from Yahoo!), Google lowered the price cf ads on sites that tend to give advertisers few sales, even if they give them large num bers cf clicks.
To put it another way, the same ad can now cost different arnounts when it appears on different sites. And of course, that same ad wiII pay publishers different amounts too.
Before Srnart Pricing, publishers had focused solely on attracting as rnany clicks as possible. With Srn art Pricing, a site with a high CTR can still earn Iess than a site with a low CTR.
So how does Google measure an advertiser’s conversion rate and what can publishers do to increase their conversion rates to ensure their ad rates rernain high?
This is where things get tricky. Google is playing its cards pretty close to its chest when it cornes to the rnethods it uses to calculate Srnart Pricing and even rneasure ROI.
13.1 What Google Has Said About Smart Pricing
This is what Google has officially told us about Srnart Pricing:
• The price of an ad is influenced by a number of different factors.
Those factors can include: the bid price; the quality of the ad; cornpetition frorn other ads in the sarne field; the location of the ad as part of a marketing campaign; “and other advertiser fluctuations.”
• The ad price is n..t. affected by the clickthrough rate. Sending advertisers large nurnbers of clicks will not increase the bid price. (That doesn’t mean that CTR isn’t important at ail for your revenues; it’s just not irn portant in deterrnining the arnount you receive for the click.)
• “Content I s King.”
Google rnakes it pretty clear that sites that will benefit rnost frorn AdSense are those that “create compelling content for interested users.” They also ernphasize the irnportance cf bringing targeted traffic to look at that content. Those are two different factors which together create a site with loyal, appreciative users. Just the sort cf thing that every sericus webrn aster wants.
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13.2 What Else DoWe Know About Smart Pricing?
What Google has told us about Smart Pricing isn’t much. It also raises at least as many questions as it answers: How does Google judge the quality of an ad? How can they teli the role an ad plays in a marketing campaign? What are the other “advertiser fluctuations”?And perhaps most importantly, how do they track the resu Its of the clicks?
Ail of those pieces of information would be very useful to a publisher. But Google wasn’t letting on.
Fortunately, publishers caught a break. Jennifer Sleg, the author of an excellent contextual advertising blog at www.Jensense.com, (you should definitely make this site a part of your regular reading) was contacted by an advertiser who was being tempted back from Yahoo! to Google. He told Jen what the AdSense salesman had told him about Smart Pricing. She told us.
This is what it boiled down to:
• Smart Pricing is calculated across an AdSense account.
So if you have a number of different sites covering a range of different topics and one of them delivers a low ROI, ail of your ad prices may be lowered.
• Smart Pricing is evaluated weekly.
If you believe that an ad is delivering a low ROI, you can remove it from your site and you should see higher ad prices within a week.
• Smart pricing is tracked with a 30-day cookie.
Users dont have to convert immediately into a sale (or whatever will count as a conversion) for you to benefit. They can think about it for a month and you’ll still get the benefit.
• Image ads are affected by smart pricing.
Few serious publishers use image ads except when they’re receiving CPM campaigns. Was this a reference to ads in low locations receiving lower rates?
• Prices may be reduced even below an advertiser’s minimum bid.
So looking up the bid prices for targeted keywords won’t help you very much; if your ROI is low, your rates could be lower than the minimum quoted.
• Conversions accounts are tracked by advertisers opting into AdWords Conversion Tracking.
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But we stili dont know what Google is tracking or how it’s making calculations with its resu Its.
13.3 Strategies To Benefit From Smart Pricing
The challenge for publishers trying to keep their ad rates high is that there’s no way to know exactly how many of your clicks are converting into sales for your advertisers. You can’t even telI what would count as a sale for the different advertisers you’re promoting.
The best you can do is keep track of your clicks and your revenues, and make sure that they rise and falI at the same rates.
If following your stats was always important, Smart Pricing has made it absolutely vital. There’s little point in spending hours trying to increase your CTR if the value of your clicks is dropping like a rock.
So what should you do if you notice that your income is dropping but your CTR rate remains the same?
The first thing you should do is protect yourself. Because one site with a low ROI can affect ail the sites in your account, dividing your sites between different accounts would prevent ail of your revenues falling if one site underperforms. Officially, that’s a breach of TOS, 50 you can’t really do it But I don’t see why two different sites can’t be owned by two spouses. If you own more than two sites though... well, I guess you’re stuck.
Next, if you suspect that one page has a low ROI, try removing the AdSense code from that page, wait a week and see if you can spot an improvement in your ad prices. If there’s no improvement, replace the code and try taking the code from a different page. You want to find the page that’s poison ing your earnings and keep AdSense ads off it until you can bring in the kind of traffic that suits your advertisers.
And that’s where you’re most likely to find the underperforming pages. The pages that are most Iikely to have the greatest conversion rates for advertisers are those that have the most loyal following. The doser the connection between your site and the interests of your visitors the more likely they are to click on your ads — and buy when they click.
So it’s also a good idea to create niche sites that appeal to niche audiences, rather than general sites that bring in audiences interested in a bunch of different things. Those sorts of u sers will also only have a vague interest in some of the things on your site and could lower your conversion rate.
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You might have a blog, for exam pie, in which you discussed your interests in... oh, dogs, computer games and the movies of Mei Gibson. That wouid bring in users with three different kinds of interests... and three different kinds of ads. But a dog-ioving user who ciicks on an ad for Mei Gibson DVDs is iess iikeiy to actuaiiy buy than a Mei Gibson fan. Your conversion rate wouid drop and the vaiue of every ad you promote wouid faii too.
But if you created three separate biogs, one for each of your interests, you wouid receive fewer faise ciicks, and a higher rate of conversion.
Uitimateiy then, the ideai strategy is, as aiways, to create good content that attracts genuineiy interested users.
Don’t rem ove the AdSense code from pages with Iow CTR; rem ove it from pages with Iow ROI!
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