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Google AdSense: Advertising Revenue For The Rest Of Us

by Dr. Ralph F. Wilson, E-Commerce Consultant

I can remember when CPM Internet advertising was king, when advertisers paid on a cost per thousand basis. When banner ads averaged $35 per thousand views. And when people actually clicked on banners.

But CPM website ads are dead. Long live PPC! Over the last couple of years we've seen the rise of Pay Per Click (PPC) contextual advertising through Google AdWords. When you put in a search word at MSN, sponsored ads now display at the top of the list, directly related to your search word. Ad pricing is no longer determined by the prestige of the site, but by the market value of the keyword as determined by open bid between advertisers.

This spring, Google extended their contextual ads to thousands of content-rich websites with ads precisely matched to the editorial content on the page where they appear.

The result? Significant advertising dollars are now flowing once more to sites parched by severe advertising drought. It feels good, like raindrops on your face after a hot, dry summer, making dust craters on the hood of your car and causing the air to smell fresh and clean and happy.

Less than a month ago, I began to show Google ads on my website. As I look back on my income over those days, I can see some financial hope for the future. But there are questions, problems, and drawbacks. Google AdSense won't work well for many publishers. Let me explain some of the ins and outs.

How Does It Work?

Google has become so popular because of its uncanny ability to index and analyze web pages, and that it delivers what the searcher is looking for quickly and reliably. Now Google is using that same technology to determine which ads belong on which pages.

Last month I submitted an application to Google to be considered for their AdSense program. After confirming my e-mail address. Almost immediately I was invited to place ads on my website. Within hours I began to accumulate some data on pageviews and click-throughs and could see what my month-to-date total was. I was impressed.

The ads come in 2 formats: 468x60 pixel banner size for up to two ads and a 120x600 pixel vertical skyscraper ad which displays up to four ads. In my experience, you're likely to almost double your click-through rate if you display the 4-ad skyscraper rather than the 2-ad banner—there's just more that might interest viewers.

The JavaScript Code

Google swears you to secrecy when you sign up for their program, but since the code can be seen anytime you do a "View Source" on a AdSense-equipped page, I'll show you the code for a banner ad (though I've altered the publisher account number so this code won't work any longer):

<script type="text/javascript">
<!--
google_ad_client = 'pub-862 ... 30';
google_ad_width = 468;
google_ad_height = 60;
google_ad_format = '468x60_as';
// -->
</script>
<script type="text/javascript"
src="http://pagead2.googlesyndication.com/pagead/show_ads.js">
</script>

When your website is approved, you'll receive your own publisher number and the appropriate JavaScript code to paste onto your web pages.

When your page is displayed, here's the process that Google probably goes through in showing the ads:

  1. A visitor's web browser requests a page on your site.
  2. This activates the JavaScript code on the page, sending the URL of the requested web page to Google's database.
  3. Google looks up in its database the most prominent keywords or keyphrases for that web page.
  4. Then Google searches for the highest paying ads that match these keywords
  5. Google places the appropriate ads on your web page for your visitor to see, all in seconds. Pretty nifty.

How Much Does Google AdSense Pay?

As a publisher, you share in the revenue that Google receives from its PPC ads. Google, however, hasn't announced a formula for sharing revenue with publishers in section 12 of its Terms and Conditions document. Google's audacity to ask publishers to enter into a blind agreement is one measure of publishers' hunger for advertising dollars—whatever dollars—and an indication of the trust Google experiences in today's marketplace.

So what is the revenue split? We aren't told, though the actual amounts are proportional to the market value of keywords that describe your content. Here's an idea what those words might cost for Google ads in my field.

 

Max. Bid $4.70

Max. Bid $1.00

Bid

Position

Bid

Position

e-commerce

$1.75

1.4

$0.45

4.2

e-mail marketing

$2.76

1.5

$0.84

4.2

ecommerce

$1.06

2.0

$0.26

2.8

Internet marketing

$2.66

1.3

$0.72

4.2

Web marketing

$2.52

1.0

$0.49

3.7

This gives me some idea of possible gross revenue for my site. I am not at liberty to disclose the average click-through rate and average PPC payment per click on my site, though that information is made available to me daily and cumulatively.

In talking to well-known marketers, I hear guesses of a publisher's share ranging from 25% to 60%. For all we know Google could be striking different deals with different sites, especially those over 20 million pageviews per month that have greater clout in the marketplace. I would guess the publisher's share to be as much as 50% of the gross PPC revenue, though I could be way off. None of us has enough information to make an accurate judgment and Google isn't talking. What the Godfather gives, we bow and accept gratefully without any questions for fear he might put out a contract on our websites.

Here are the factors that contribute to the amount of money you can make on your site:

  1. PPC value of the predominant keywords on your website. "Life insurance" for example, would be high. "Fish tank filters" would be low.
  2. Amount of traffic you generate to your web pages.
  3. Prominence of the Google ads
  4. Click-through rate for the ads that appear.
  5. The unknown revenue share that Google is paying.

Just for the fun of it, I set up Google AdSense on my Christian Articles Archives. I could quickly see that it wasn't well suited. The keywords (Bible study, Bibles, church, discipleship) don't cost that much—13¢ to 49¢ for first position. I get a fair amount of traffic to this site, but nothing like the traffic I attract at Web Marketing Today, except perhaps at Christmas and Easter. When I pasted Google AdSense code on these pages I came up with a lot of ads for National PTA and American Cancer Society—in other words, free ads. Is this site a good candidate for Google AdSense? No. I'll probably remove most of the ads and just show them on certain pages that indicate higher PPC prices.

My older son, an English professor, tried AdSense code on a couple of his academic sites, www.geoffreychaucer.org and www.virgil.org, but took the ads down rather quickly. They were for college essay writing services—an anathema to professors.

Business-focused sites like Web Marketing Today will do very well with Google AdSense, but information sites that don't contain high-paying keywords won't receive nearly as much.

Will They Accept My Site?

Google AdSense tells us that the following sites are not acceptable: sites with excessive profanity; hate, violence, racial intolerance, or advocate against any individual, group, or organization; hacking/cracking content; drugs and drug paraphernalia; pornography; gambling or casino-related; content; incentives of any kind for users to click on ads; excessive advertising; other content-targeted and/or text-based ads on the pages displaying AdWords ads; pop-ups that interfere with site navigation or are for downloads; and ads that mimic AdWords ads or appear to be associated with AdWords ads on your site. Google says it will monitor sites that are showing their ads and suspend sites that don't abide by their rules.

Does a person from Google look at a site before deciding to accept it into the program? If it's a new site with little traffic, a human surely views the site. Don't submit a site that isn't ready for prime time, has "under construction" signs, or looks tacky. It's a lot easier to get your site ready first, than try to convince Google to re-examine a rejected site. On the other hand, if your site has lots of incoming links and is generously spidered by Google already, you might receive approval within minutes after confirming your e-mail address.

Once you are approved, you can login and get HTML to paste into your web pages. If you employ Server Side Includes (SSIs) on your site it's even easier, since you'll only have to paste in code to a minimum number of SSIs for ads to appear throughout your site.

The Automatic Ad Agency

If you've ever worked with ad agencies or tried to solicit individual advertisers to place ads on your site, then Google AdSense will feel like a breath of fresh air. Google handles the entire relationship with advertisers. There are no run dates for publishers to schedule, no banners to install, no invoicing, no reporting. Just apply, paste in the JavaScript code, and Google's "automatic advertising agency" works for you day and night finding willing advertisers, taking orders, and matching appropriate advertisers with your site.

Problems For Publishers

That doesn't mean, however, that Google AdSense is problem-free. As I mentioned above, Google's unwillingness to specify revenue share percentages doesn't bode well. Sure, Google is just feeling its way in uncharted territory and has to stay profitable when the inevitable competition arises. I don't think publishers should get too confident in Google's current largesse. What Google gives, Google can take away—either as a result of economic squeezes or greed.

A more mundane problem is finding inappropriate ads appearing on your web pages. Fortunately, this is much easier to fix. You can filter out any ads you find from competitors or that you find distasteful. (I had to exclude some ads for cheapo e-mail addresses to spam with.) Just list the advertiser's domain name under Advanced Options | Site Filter List. What do you do when the ad just doesn't seem to correspond to the content on your web page? Adding the appropriate keywords or keyphrases to the title tag, Meta description tag, and headlines should help Google do a better job of matching ads with your content.

Problems For Advertisers

Advertisers who use Google AdWords have the choice of limiting their ad to show only on the Google search engine, but you can choose whether campaigns also appear on the network of search sites, the network of content sites, or both.

Google AdSense on content sites gives advertisers a new opportunity. Previously, their revenues were limited by the click-throughs that could be generated on Google's search engine and search partner sites. Now the pool of appropriate content sites is greatly widened, offering greater traffic and more sales. But their is a price for this greatly increased ad coverage—potentially lower responsiveness for the same cost per click.

Andrew Goodman, author of "21 Ways to Maximize Profits on Google AdWords", manages PPC campaigns for various clients. I asked him about the responsiveness of these AdSense ads from an advertiser's perspective. He says, "As a general trend, that kind of traffic is diluted and less responsive, and in a whole different category than search engine advertising."

He's right. When people use a search engine, they are looking for answers or solutions to click on. But when they are reading the text of a content site, they aren't in the same searching, clicking mode. They've already found what they were searching for and are now trying to absorb it. This will affect the click-through rate, but also the likelihood that these users will complete a transaction.

Goodman has tracked sales responsiveness of click-throughs using sophisticated tools such as ClickTracks to determine the referral site. "Responsiveness can be equal to search engine AdWords results or be 1/20th or 1/50th as effective," he reports. "Anytime you start working with smaller publishers, the effort of policing them is too great and takes too many resources, resulting in some fraud and some bad audiences. It's a quality issue." Google had better take the quality issue extremely seriously if it wants to build on the great start AdSense has experienced.

Publishers are rejoicing today. But what if three months from now advertisers come to the conclusion that content sites are less responsive and routinely exclude them from their advertising coverage? Or refuse to pay the same prices for content sites that they do for search engine exposure? It's too soon to tell.

Implications Of Google AdSense

One thing is certain: Google AdSense is changing the way websites are being monetized.

Ken Evoy, who for years has been teaching small businesses how to build targeted microsites with his excellent Site Build It! tool, is ecstatic and can't resist saying, "I told you so." Evoy has long been a promoter of context-based advertising and sees Google AdSense as a vindication of this view. In his careful analysis, "AdSense: Making Grime Pay", Evoy observes that AdSense "rewards you for creating sites rich in high-quality, focused content...the sort of sites that make the Net a better place." He predicts, "Google is going to grab a whole lot of business away from those who try to 'make crime pay'—no need for nasty tricks, useless marketing gambits, in-your-face ads, etc. Instead, Google is rewarding those who 'make grime pay'—that is, those willing to do the hard work to produce quality, focused content."

If banner ads weren't pretty worthless before this, with a typical click-through rate of 0.3%, Evoy sees them as utterly obsolete now, since AdSense wildly outperforms them. He predicts that ad networks will have to make their pricing and accessibility much more attractive to publishers to be able to compete.

Affiliate programs, too, are threatened by AdSense. Many targeted sites will find that AdSense income outstrips all but their best-performing affiliate products, so that marginally-paying affiliate programs won't get much attention. Allan Gardyne, editor of Associate Programs, says "Second-rate affiliate programs are going to die fast now that affiliate programs and the ad networks have serious competition from Google's new AdSense." AdSense may also influence the commissions merchants are willing to pay affiliates in order to bring in traffic.

The Bottom Line

Should you apply to put Google AdSense on your website? If your site seems appropriate, yes, by all means do so. Google AdSense represents a significant opportunity for content publishers to monetize their content. And so long as this partnership benefits both publishers and advertisers who pay the bills, this could be the start of a new and brighter future for both.

 

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