I was looking for some elaboration on Googles smart pricing system for AdSense and found this great post on Jensense
For those of you who don't know about smart pricing here is her summarised explanation:
"Google's smart pricing feature automatically adjusts the cost of a keyword-targeted content 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.
And this often used example explains how this works more precisely.
As an example of smart pricing, consider two websites, each related to digital photography. The first page features digital camera reviews, while the second offers photography tips. Clicks from the page of photography tips might be charged less, because they are expected to convert into sales less frequently, resulting in lower value for advertisers. Google data determines that clicks from the digital camera reviews convert better, so clicks from this page are not discounted."
Rumours abound regarding the functionality of smart pricing. Jensense gives some credence to the following:
1. Smart pricing can affect an entire account not just individual pages.
2. One poorly converting site can affect others even if they are unrelated.
3. Smart pricing is evaluated weekly so removing ads from a site that's not converting could result in an evaluation of your smart pricing to a higher level within a week.
4. AdSense track with a 30 day cookie so a higher proportion of converted clicks can see you rewarded 29 days later.
5. Smart pricing can also affect image ads.