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Lessons Catalog
Lesson 4a: Cost Control
How AdWords Controls Costs
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Objective: Learn how AdWords helps keep your costs down with the AdWords Discounter and smart pricing.
With Google AdWords, you set a cost-per-click (CPC) bid or cost-per-1000-impressions (CPM) bid. However, the AdWords Discounter works so you usually end up paying less than this amount.
Here's how it works: After we determine your ad rank, the AdWords Discounter calculates your actual CPC or CPM. This is the actual amount you pay to maintain your ad's position above the next lower ad. Your actual CPC or CPM is never more than the maximum CPC or CPM bid you specify.
Content clicks may be priced differently than search clicks. Using smart pricing, AdWords automatically adjusts the cost of clicks for ads that appear on content network pages with CPC pricing. 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 actually reduce the price you pay for that click.
For example, let's say that you advertise digital cameras. Your ad appears on two different pages — one that reviews digital cameras and another that offers photography tips. Since users are more likely to click on your ad for digital camera reviews (and thus convert into more sales), Google doesn't discount these ads. However, Google determines that clicks from the photography tips page convert into sales less frequently and therefore charges you less per click.
Smart pricing adjustments are automatically reflected in the Avg. CPC column on your Campaign Summary page. Smart pricing is related to clicks, so smart pricing doesn't apply to cost-per-thousand impressions (CPM) campaigns.
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