A feature found in the Google Adwords platform that automatically decreases the cost-per-click bids of an advertiser, based on the perceived quality of the traffic generated by Google Adsense websites. Here’s how it works – Google will measure the results an advertiser gains from all of the pages where he is purchasing clicks. Now these results could either be sign-ups to a mailing list or product sales, depending on the goal of the ad campaign. If Google discovers that a certain website (eg: a site that publishes Google Adsense ads) is generating solid results for the advertiser, the owner of the site will stand to earn a higher revenue per click (close to what the marketer is paying), so Google’s profits as the middleman will be pretty small. On the other hand, if Google finds that a certain site is producing very poor results for the advertiser, the smart pricing algorithm comes into play, meaning that the advertiser will be charged a reduced amount per click on his bids.