We constantly receive phone calls from clients, prospective clients and reporters asking the same question what percent of the keyword price does Google pay AdSense publishers. While the AdSense Standard Terms and Conditions explicitly forbid disclosing such information, the range we often give is 20% to 50% based on numerous conversations we have had with AdSense publishers.

While the precise percentage is not clear, what is evident is that the percentage that Google pays publishers has gone down significantly since April 2004. It was at this time that Google announced it would be lowering the price of ads (i.e., charging AdWords clients less) that appear on the sites of AdSense publishers. Susan Wojcicki, Director of Product Management for Google, stated that this change came from requests of advertisers who wanted different pricing on clicks from search and content ads.

Google stated that it considered search-based ads more targeted than content ads, and that they therefore generated more clicks and revenue for advertisers. However, Google did realize that some content ads perform as well as search-based ads. As a result, Smart Pricing was born.

Smart Pricing adjusts the value of clicks based on a number of factors such as time of day, type of content, and conversion tracking. The latter, conversion tracking, measures how often a click on an ad produces a desired action for the advertiser, such as a product sales, newsletter signup, etc. The example Google gave for Smart Pricing was that a click on an ad for digital cameras on a web page about photography tips may be worth less than a click on the same ad appearing next to a review of digital cameras. While web forums are filled will AdSense publisher complaints about Smart Pricing, it is actually a fair system publishers get paid based on the quality of the traffic they provide to Google advertisers.

While the switch to Smart Pricing has decreased revenues for many AdSense publishers, there is still a massive opportunity to generate significant revenues via the AdSense program. The key is to identify valuable/expensive keywords, attract qualified customers to your site, and provide compelling text that gets visitors really interested in a product or service. This will ensure that the visitors click on the appropriate AdSense ads and buy that advertisers product or service. A true win-win-win.