Smart Pricing is a feature added by Google to give Advertisers value for money. Adsense publishers set up temporary, trashy and/or un-authoritative pages of content on topics that they know will get high paying adverts. Clicks on such pages are not really of good value for advertisers (really ?) The system, known as “smart pricing,” assigns each click a value based on a variety of factors, according to Google. Variables include site on which the ad appears, and the portion of the site where the ad appears.

Google gives a little away in its statement announcing Smart Pricing to advertisers back in April 2004.

‘We’re introducing automatic price adjustments for certain clicks 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. And 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 analyzing data across our network, and 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.