Money & metrics · also called click discounting, quality-based pricing
Smart pricing
Smart pricing is Google's system for automatically lowering what an advertiser pays for a click on a partner site when that click is less likely to lead to a sale.
Advertisers bid one price, but not every click is worth the same to them. Google's help pages describe smart pricing as a system that may reduce an advertiser's bid when a click from a partner site looks less likely to become a business result such as a purchase or sign-up. Its stated purpose is to keep advertisers confident enough to keep bidding on the network.
For a search arbitrageur this is the quiet penalty for weak traffic. The publisher's revenue share percentage does not change, but it is a percentage of a smaller amount, so RPC drops. No clicks are removed and no notice is sent. It differs from a clawback, which reverses revenue already reported.
Google has updated the mechanism over time. Its search-partner announcements state that from July 2023 campaigns using manual bids without conversion tracking get smart pricing on partner sites, while campaigns with conversion tracking are handled by Smart Bidding, which can bid lower or higher for each partner site according to its conversion record. Either way, pay follows advertiser conversion performance.
Think of it like this
A wholesaler pays full price for fruit from farms whose crates usually arrive ripe, and quietly offers less to farms whose crates are often half spoiled.
An example
Say advertisers bid $2.00 a click and the publisher's share is 50%, so RPC is $1.00. If the click is discounted by 30% to $1.40, RPC becomes $0.70. On 270 clicks, revenue falls from $270 to $189, below a $200 traffic bill.
Related terms
RPC (revenue per click)
RPC is the average revenue earned per monetised (paid ad) click: the "sell" price in search arbitrage. Convert it to revenue per visitor (RPV) before comparing it with CPC.
Advertiser conversion
An advertiser conversion is the valuable action, such as a sale or lead, completed on the advertiser's own site after someone clicked their ad on a search feed.
Traffic quality score
A traffic quality score is a rating of how genuine and commercially valuable a publisher's visitors are, used to decide what their clicks are paid, or whether to keep them.
Clawback (revenue deduction)
A clawback is revenue a feed removes from a publisher's earnings after the fact, usually because clicks were judged invalid and the advertiser was refunded.
Search partner network
The search partner network is the collection of non-Google or non-Microsoft sites where an advertiser's search ads can appear through syndication.
Conversion rate (CVR)
Conversion rate is the percentage of visitors or clicks that go on to complete a desired action, such as a purchase, sign-up or enquiry.
Sources: Google AdSense Help: About bidding on AdSense (smart pricing), Google Ads Help: Search partners network (SPN) announcements