Being a user of adsense for over 4 years now, I think I am in the positions to explain what is Adsense Smart pricing.

Simple explaining, Adsense smart pricing is lowering of earnings per click. Let me explain it with an example :

Suppose you are having a site on shoes and you are using google adsense on the site. Now initially you may be making $0.50 per click (shopping sites make more money per click) but google will also be tracking down what kind of conversions the advertisers are having whose ads are getting shown on your website. For example, if I am an advertisers who is paying $1/click for an ad and I don’t get a conversion out of 100 clicks, I will certainly be very unhappy that after 100 clicks, no one bought anything.

So now what google does is, it smart priced your account saying that your site is giving low quality traffic which is not converting so instead of paying you 50 cent per click, we will be paying you 20 cent per click. Now the advertiser can have 250 click for $100 and the chances of someone buying his product is high.

Smart pricing is automated and self adjusted and you can’t do anything about it (there are few things though which people say if you do helps you in avoiding smart pricing, more on this in coming post).

Smart pricing as expected is heavily frown upon by webmasters as suddenly (not that suddenly actually) there revenue gets down by 30-50%. if your account is getting smart priced (the value of clicks are coming down heavily) then may you need to see the quality of traffic and ad relevancy. Some times its not a bad idea to try other ad programs too.