Google’s Smart Pricing and Domainers
This is a comment I was trying to make on Michael Gilmour’s blog series about Google and their Smart Pricing policy:
Google has to tread a very fine line between keeping advertisers happy and keeping publishers happy. And often, advertisers are kept happy at the expense of publishers because they’re the ones that are footing the bill!
Have a look at this this report Search Syndication and Traffic Quality from leading PPC optimisation firm, Efficient Frontier. They took a sampling of advertisers across 4 different verticals and conclude that “in general, syndication traffic does not convert at the same rate as pure search traffic.”
The problem with Google’s Content Network was that advertisers were not seeing ROI compared to their Google-Search-only campaigns. So Google introduced Smart Pricing to deal with this issue.
Definition: “Google’s smart pricing feature automatically adjusts the cost of a keyword-targeted content click based on its effectiveness compared to a search click. So if our data shows that a click from a content page is less likely to turn into actionable business results — such as online sales, registrations, phone calls, or newsletter signups — we reduce the price you pay for that click. With no extra effort for you, Google technology helps ensure you get strong ROI from your AdWords advertising, wherever your ads appear.” (https://adwords.google.com/support/bin/answer.py?answer=9562)
I agree that Google aren’t very transparent with their payout percentages to you publishers but this statement “Google is able to launder a lot of bad traffic with good traffic and make it all pay the same while they themselves can discriminate on what they pay out” is just not true.
Google’s Smart Pricing is analysing the effectiveness compared to a search click. That’s it. Not comparing a “good” publisher to a “bad” publisher. It also doesn’t keep the extra margin, it automatically passes on the better pricing to the advertiser. Otherwise there would be no point because the advertiser would still be getting poor ROI from their spend on the Content network.
“For example, let’s say you advertise digital cameras. Your ad appears on two different pages – one that reviews digital cameras and another that offers photography tips. Since users are more likely to click on your ad beside digital camera reviews (and thus convert into more sales), Google doesn’t discount these ads. However, Google determines that clicks from the page of photography tips convert into sales less frequently and therefore charges you less per click.”
(http://www.google.com/adwords/learningcenter/text/18989.html)
Also, the paper that you mention is (I think) this case study: Efficient Frontier’s automotive clients receive twice the conversion rate as search with domain ads. From what Google says, if your parked domains are producing ROI that is similar or better than Search then Smart Pricing will not discount those clicks. So there should be no problem for you then (unless your parking company is taking an excessive cut). In addition, advertisers can now run Placement Performance reports specifically for Parked domains. So savvy advertisers will remove poorly performing domains anyway.
Ultimately ROI is what it is all about - and ROI is defined by the advertiser, not Google.
