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What is SmartPricing?

Mike Peters, 08-30-2007
Monetizing your website with contextual advertising? It is important that you understand the underlying technology determining how much you are paid, per every single click on your content ads. This technology, is known as 'Smart Pricing'.

Before we jump into the definition of what is SmartPricing and how you can maximize your ecpm (earnings / traffic), let's step back for a moment and review your typical search-engine's business model.

Search Engine's Business Model

Search-engines provide a free service to end-users, allowing users to quickly search through billions of documents, finding the ones that are most relevant to the search query.

Search engines invest heavily in algorithmic research, human review, server farms and smart storage, to provide the absolute most relevant results as quickly as possible, in an ongoing battle to increase the number of users using the engine.

All search engines make money by selling sponsored-results to advertisers. Advertisers can purchase certain keywords, so that whenever a user is searching for "shoes" for example, a business selling discount shoes will show-up as one of the sponsored listings.

Search engines also allow any website owner, to signup as a content-network publisher, place a simple JavaScript code on their website and start displaying relevant sponsored-results on the site. Search-engines collect the advertising fees from advertisers and pay the website owner a portion of the fee.

In Summary:
* Search-engines make money by selling sponsored-results slots to advertisers
* Search-engines are in the business of keeping advertisers happy
* Advertisers are happy when the sponsored-results they purchase, convert well, generating a positive return on total advertising spent.

Ok so,

What is SmartPricing and how does it tie into the SE business model?

SmartPricing is an algorithm that provides a discount to advertisers, based on the perceived value of the traffic generated by a content-network site.

Content-network sites that generate better conversions for advertisers, are paid more. Sites that generate poor conversions, are discounted and eventually pushed down to the bottom of a search-engine content-network inventory.

Without SmartPricing, advertisers would blow big budgets, not seeing any positive return on their investment and eventually stop buying advertising from the search-engine.

Search engines will always do everything possible to protect their advertiser's ROIs.


The Quality Score Algorithm rates how relevant a target URL is to the keyword purchased and ad creative, to protect advertisers from overspending because of competing MadeForAdSense sites, while the SmartPricing Algorithm rates how well a content-network site converts, to protect advertisers from overspending on content-network sites that would yield a negative return on advertising spent (ROAS).
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