Seth Godin May Be Costing You Money

This morning I noticed an entry on Sphinn highlighting GreyWolf’s Seth Godin Wants to Cheat Advertisers with Fake Clicks post. It discusses Seth Godin’s Ads are the new online tip jar post, which suggests that readers should click ads to reward bloggers for their writing. To quote Seth:

If you like what you’re reading, click an ad to say thanks.

GreyWolf condemns Seth’s advice and rightly points out that anyone following this advice is guilty of click fraud:

If you click on an ad and your purpose is to make sure the site owner or blogger gets money from the click, and you had no intent to buy or research, that is click fraud.

As you’d expect, given they are Internet Marketing / SEO communities, comments on GreyWolf’s post and on Sphinn strongly condemn Seth’s statement. The majority of commentators agree that this is click fraud. I concur!

However, what’s intrigued me is that no-one’s mentioned the effect this may have on a blog being smart priced by Google. Seth’s advice may actually end up costing bloggers who run Google Adsense.

I’m not sure why no-one’s mentioned this. It may be that most members of those communities fall on the advertising, rather than publisher, side of the fence. I’m definitely on the publisher side, so I’ll go ahead and explore the impact on smart pricing.

What Is Smart Pricing?

I’m not going to go into what smart pricing is in detail. That’s been covered before, both by myself in my How To Avoid Adsense Smart Pricing On Blogs post, and by better bloggers than me.

The short description is that smart pricing is a penalty applied by Google, resulting in the amount of money you receive when someone clicks an Adsense ad (on your site) being only a fraction of what you would normally receive.

If you want to find out more about smart pricing, the best description I’ve found is Grizzly’s Optimization Tips for Adsense. Read his long article in full for a good understanding, but here’s his quick summary of smart pricing:

If you are running ads on your blog that an advertiser has bid $0.50 per click on and your traffic clicks the ads and doesn’t convert well for the advertiser then Google will not pay you the usual $0.25 per click. They will likely give you $0.01 to $0.05 per click. This means you have been smart priced. This will also mean that you will receive lower payouts on every site you have Adsense on – not just the poorly converting site. This is a penalty because you are not optimizing your Adsense pages in order to give the advertiser the most bang for his or her buck.

So basically, if clicks from your site give advertisers a low conversion rate, you get a huge penalty on what you earn.

But It’s More Complicated Than That

There’s more at play here than what I’ve described above. Admittedly, no-one but Google really knows how it works, but Grizzly knows as much as anyone else and mentions targeted traffic.

Google considers where the traffic comes from and how much value traffic is to the advertiser. Even if the visitor doesn’t buy anything from the advertiser, if it’s targeted traffic, Google considers that you’ve delivered quality traffic to the advertiser. As Grizzly explains:

My best advertiser is looking for people looking to “make money online”. The ad says “Make Easy Money Online”. Most of my traffic – about 75% find my blog searching on Google for the term “make money online” or a long tail version of that term. If one of my visitors clicks on the ad they are most likely looking for what the advertiser has to offer and even if they don’t buy, Google can charge the advertiser full price because the visitor left a “make money online” trail. They found me using the term and they found the advertiser because of the term. That is as targeted as traffic can get and Google can charge the advertiser full price. If all my traffic came from stumble upon and clicked the ads then the advertiser wont get many conversions and Google can see where the traffic originated, knows it isn’t targeted and will penalize me and give the advertiser a rebate.

So you’re more likely to be smart priced if a high percentage of the visitors clicking ads, arrived at your site from a source other than a search engine.

Seth Godin Could Cost You Money

How can you avoid smart pricing? The answer: Try to ensure you’re delivering targeted traffic (ie from search engines) to the advertisers and that a good percentage of that traffic converts for the advertiser.

If your regular readers follow Seth’s advice and click on ads to reward you, you’ll get more clicks, but you won’t be delivering targeted traffic to the advertiser and only a low percentage of people will actually buy anything.

That puts you squarely in smart pricing territory. Thanks Seth!

If you only have one site, the impact may not be so bad: There’s no guarantee you’ll be smart priced and anyway, a lot of low value clicks may equal a few high value clicks.

However, the risk is not worth it, especially if you have other sites running Adsense. If you get smart priced on your blog, you get smart priced on all your sites. That could really cost you.

Final Thoughts

I’ve got nothing against Seth Godin – he’s obviously very well respected – but I think he’s wrong on this occasion. I’m far from an expert in this, but leaving the click fraud argument aside, it seems his advice, aimed at helping bloggers, could actually hurt them if they run Google Adsense ads.

As a publisher, I don’t want my normal visitors to click ads. When people choose to click ads on my site, I want them to be highly targeted search engine visitors, who’ll lead to a higher advertiser conversion rate and won’t get me smart priced.

Oh, if you came to this post from Sphinn or StumbleUpon, or you’re one of my regulars, and you’re wondering why you can’t see Adsense on this blog, well you can’t. Only search engine visitors see Adsense ads on this blog.

Tags: Adsense, advertising, google, make money online, search, traffic