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For the same niche and same set of keyword, does Google AdSense serve higher CPC ads to a website that has higher number of visits?

I have observed that for similar niches 1 website (with 3K daily uniques) makes around $100 a month, and another website (with 10k daily uniques) makes around $700-800 a month

It seems that the earning curve is not linearly dependent on visit count and somewhat increases at a rate faster than the growth of visits, this leads me to think if the Google AdSense algorithm serves higher CPC ads once a website starts getting a large number of visits.

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I'm not working at Google but from my experience I think there is no such algorithmic rule that would match higher cost ads with high traffic sites.

First of all Google is interested in getting as much clicks as possible so it doesn't matter if it's a high or low traffic site. They try to display the ads with the most chances of getting clicked. So they follow 2 things: relevancy and revenue. If your hypothesis would be right that would mean Google would have to pay a lot more money to popular site owners. I don't see any revenue advantage here for Google.

Another important thing is the bid price for the ad display. People tend to bid more money on ads that can be displayed on popular/high traffic sites. This means the overall cost per click goes high on these sites and implicitly so does the publisher's revenue. Advertisers are willing to pay more to see their add on a big site. It may be because they want more exposure on a certain niche or because those sites are better in conversions. Anyway there are a lot of factors involved.

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hmm, sounds good –  Silver Moon Nov 27 '12 at 6:34
    
but again, google has this smart pricing policy for adwords, which simply says that sites generating low quality clicks will receive a lower cpc over time, therefore if a site is generating high traffic, then it will more likely generate better quality clicks (compared to a low traffic site) then eventually get a better cpc. –  Silver Moon Nov 29 '12 at 5:55
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