To understand the basic premise behind smart pricing, you must first understand a bit about the Adwords program and what an advertiser seeks to get out of using Google Adwords. If you have a company website, a product website, or some other site or blog that you need targeted traffic for, a great way to get this traffic is through pay per click advertising.

So when an advertiser signs up for Google Adwords, they choose a monthly budget, a cost per click that they are comfortable with, keywords that are related to the topic of their website, as well as a text or graphic ad that they would like to represent their website. After their program is set up, their advertisements will appear along the right side of the page under the 'Sponsored Links' tab any time somebody does a Google search for one of the terms they have specified.

An advertiser may also choose to have their ad broadcast through the content network, which is the collection of thousands of independent websites that have signed up for the Adsense program and are currently running the code on their webpages.

Prior to smartpricing, an advertiser could only choose one cost per click (CPC) price, and that advertiser would be charged the same amount whether the click came from the search engine results or whether it came from a site running Adsense. This was good for Adsense publishers, but was not very good for advertisers, seeing as how a person who typed in a specific related term into the search engine would be much more targeted than someone who simply saw that ad on a related website.

The premise behind advertiser smartpricing is that an advertiser can choose two different cost per click settings: one for the ads listed in the search engine, and another (usually cheaper) CPC for the Google content network (websites running Adsense and also Google's ancillary programs like Gmail). The question is, is this good or bad?

Well this is a very heated topic, and many webmasters now say that Adsense is 'dead' because many advertisers will choose a much higher rate like $0.95 per click for ads listed next to search results, and only around $0.15 per click for ads listed in the content network, so Adsense publishers do not earn nearly as much per click as they would have 2 or 3 years ago.