What is smart pricing and why does Google use it?

Google’s smart pricing feature is designed to raise advertiser confidence in the AdSense network, which in turn can lead to higher bids on ads that appear on publisher sites. This then benefits the entire advertising ecosystem of publishers, advertisers, and users in the long run.

To appear on AdSense content pages, AdWords advertisers bid on ads and compete in an auction to appear on your pages. When advertisers compete to appear on AdSense for content pages, they’re looking for business results from their clicks. These results differ from advertiser to advertiser, but could range from an online purchase to a newsletter sign-up. To ensure that advertisers are getting value from their bids on AdSense sites, we determine how likely a click is to lead to a business result for an advertiser. If our system determines that a click is less likely to lead to a business result, the advertiser’s maximum bid may be reduced.
Smart pricing allows advertisers to confidently bid the maximum amount they’re willing to pay for clicks on AdSense sites, which then grows the advertising pie for publishers.

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