Google AdSense Click Through Rate [CTR] and Smart-Pricing

Did you know that your Google AdSense Click Through Rate may impact your earnings through something called smart-pricing?

No? Well, let’ delve into the details of AdSense CTR and smart-pricing to make sure we are practicing sound AdSense strategies.

If you use Google AdSense on your blog, you should know about the term CTR, or click through rate.  Your Google AdSense click through rate determines how much money you will make online and, quite possibly, whether you will get AdSense smart-priced.

Let’s start this article off with something I was told yesterday:  “You should take Google AdSense ads off of heavily trafficked pages with a low click through rate.”

An odd quote, don’t you think?  Aren’t our heavily trafficked pages the ones on which we want to put Google AdSense?  Aren’t the pages with the most traffic the ones that will bring in the most money?

These would all seem to be logical questions.  More traffic equals more money, especially if we are placing for AdSense high paying keywords.  This is what the gurus endlessly tell us.  However, this advice-to take Google AdSense off of popular pages-is just the contrary.  Can lower traffic equal more money?

Well, to understand this, let’s take a look at the metric AdSense defines as the click through rate.  As Google defines it, this metric measures “how often users click on your ads”.  Thus, if 100 people view your web page, and one person clicks the ad, you have a CTR of 1%.

A high CTR is a good thing.  This means that more people are clicking your ads and that you will make more money.  Of course, advertisers pay different amounts for different subjects.  As an example, an advertiser might be paying much more for a click about insurance than for a click about music.

To figure out what your actual earnings will be for each 1,000 impressions, AdSense uses a metric called eCPM.  This is a measurement that tells you approximately what you will earn for each 1,000 impressions on your AdSense pages.

So, if a popular page has a low CTR, this will mean you will make less money because very few people click the ads.  However, why should you remove AdSense from this page?  It still earns money, right?

Well, this is where the speculation begins as we look at a concept called AdSense smart-pricing.  Let’s take a look at this term-smart-pricing– which remains very undefined by Google.  The idea is that, in the end, advertisers pay for clicks in the hopes to make sales.  If they don’t make sales, they will stop buying ads.  Thus, on the backend, Google works with their customers to determine if they are making money.  If AdSense on a particular webpage does not generate sufficient customers, that AdSense account-the whole account-will get smart-priced, meaning that you will get paid less for each click and earn less money.

Google claims that CTR has nothing to do with smart-pricing.  However, many in the industry disagree with this.  The thinking goes like this.  If you have a page with a low CTR, people are not that interested in the ads that are being shown.  So, even if a user clicks, they are not likely to buy whatever the advertiser is selling.  Thus, in the end, the Google client-the advertiser-will not make much money and your Google AdSense account will be smart-priced and all of your other pages will be penalized because of this one page.

Of course, this is all speculation because Google does not provide much information on smart-pricing.  However, if you have popular page with a very low CTR, you may want to remove Google Adsense for a time and see if your earning’s improve.