When Google first started, you basically just earned a certain percentage of whatever the AdWords advertiser was paying per click. It was pretty simple. If the advertiser paid $1.00 per click and if you as a publisher were earnings 50% of that, you made $0.50. Easy. Google started to realize, though, that all clicks were not created equal. Clicks from some sites were more valuable than others, at least that's what they figured. So they came up with an alogorithm, a mathmatical equation for determining how valuable your AdSense account, sites and pages are, and use that equation to determine what percentage you get per click.

Speculation Galore

Smart Pricing has triggered a HUGE amount of speculation on the part of AdSense publishers. Google is notorious for having very little to say about the way its algorithms work. Their thinking is that the less people know about it, the less chance they are going to be able to cheat the system. This lack of communication has caused all kinds of speculation about how Smart Pricing works, what it looks for, etc. Nobody knows exactly how it works, but I've got hundreds of websites, and track everything. I've learned a few things about what Smart Pricing seems to like and what it seems to not like.

What We Know For Sure

The one piece of information that Google has given out about Smart Pricing is that it takes into account how well the visitors from your site who click on the ads convert into customers for the advertiser. In a perfect system this would be all of the information that Google used. If your clicks converted well, you would be well paid. If they converted badly, you would be paid less per click.

However, AdWords advertisers are not required to reveal their conversion data to Google. Google gives them that ability, but a lot of advertisers do not use it, so Google has to try and