AdSense

What is it all about?

Here's how Google describe AdSense: Google AdSense is a fast and easy way for website publishers of all sizes to display relevant, unobtrusive Google ads on their website's content pages and earn money. Because the ads are related to what your users are looking for on your site, you'll finally have a way to both monetize and enhance your content pages.

Basically it means that you can quickly add some advertisement to your web site or blog. Google will automatically decide which are the best ads to show (based on your site's content, which is why it is called contextual ads). Because the ads are related to your content, they are also less annoying then plain banners. Usually they are text based, which makes them even less obtrusive.

Here's an example ad unit:

Adwords

AdWords is Google's advertisement platform. Basically advertisers can sign-in to AdWords, place their ads, choose how much they are willing to pay per visitor (pay-per-click), and their ads start to show.

There are two types of ads here - search ads (which show in Google search results) and 'content-network' - ads that show up in AdSense powered sites.

To put it simply: Advertisers use Adwords to 'buy' ads, and site owners (web publishers) use AdSense to show those ads in their site and earn money.

Which ads are displays?

First of all, Google decides which ads are relevant to your site - by reading the text on your site, and deciding on the 'topic' of your page. It then finds ads in its inventory that matches your site.

From all those ads, Google chooses the one that brings you the most money. It uses the history performance of the ads to decide:

• Each ad has a click price, which means the maximum amount the advertiser is willing to pay per click.
• Each ad also has a Clickthrough rate - the historical percentage of clicks. You can imagine that some ads are more clicked on than other ads.
  
• The final position of each ad is calculated using those two numbers. Basically Google will put the best ads first - the ads that will give you the most money per impression (exposure).

Let's check an example. Let's say I have a site about dogs. There are two advertisers that have ads about dog food.

• Advertiser A is willing to pay 1$ per click. Historically his ad is clicked once every 1,000 impressions. So if you will display his ad a thousand times, you will earn 1$. (this is called CPM - cost-per-mil, the amount of money it costs to buy 1,000 ads, or the amount of money you get if you display a 1,000 ads).
  
• Advertiser B is willing to pay only 0.5$ per click. But his ad is great, and people click on it 5 times for every 1,000 impressions. So if you'll display this ad a thousand times, you will earn 2.5$.

So obviously Advertiser B is the better ad!

Placement targeting

A different type of targeting (less popular) is placement targeting. This means that the advertiser can choose which sites his ad will appear on - not based on content. Those ads behave the same as the regular ads, and they play the same bidding game - your site will always display the best ads for you.

In placement targeting, advertisers can also choose to pay-per-impression (i.e. state directly how much money they will pay for 1,000 ads displayed). Then it doesn't matter how many clicks they get, they always pay the same. Of course these ads will only be displayed if they are the best available...

AdTypes and sizes

As a web publisher, you can choose from several ad types and sizes.

The major ad sizes are:

• Horizontal banners
• Vertical banners
• Square Banners

There are several ad types:

• Text ads, which comprise usually of several ad 'units'.
• Image ads
• Video ads
• Widget ads - rich, interactive banners.
  

There are two kind of ad units - regular ones, and 'link-units'. The link units display a list of topics. If you click on a topic, you get to a page filled with ads. Only when someone clicks on those ads, you get money. Some people really like ad-units, and some do not.

How much money can you expect?

The money you can expect depends no many factors:

• Your site's content. Some issues are simply more attractive to advertisers. For example, if you have a site about mortgages, banks will happily pay top dollar for each ad. If you have a site about medieval architecture, you might find that there are less advertisers who are interesting in your visitors.
  
• Your traffic: obviously the more traffic you have, the more money you make. But the traffic characteristics is very important. For example your site might show great ads, but if the visitors got to the site by mistake, they will not be interested at all, and nobody will click.
  
• Your design: your click-through-rate (% of clicks) depends on how many ads are in your site, where they are positioned, their colors, their types, and other factors.

As you can see, it's not easy to know in advance how much money you'll make. The easiest way is just to give it a try! It's really easy and click to join AdSense.

Site optimization

Optimization your earnings is an art. You may find that many factors effect your earnings. Here's some things to get you started:

• The location of your ads is very important.  Here's a site 'heat' map published by Google - the darker the colors, the more clicks you'll see. Here's what Google says:
  Certain locations tend to be more successful than others. This "heat map" illustrates the ideal placing on a sample page layout. The colors fade from dark orange (strongest performance) to light yellow (weakest performance). All other things being equal, ads located above the fold tend to perform better than those below the fold. Ads placed near rich content and navigational aids usually do well because users are focused on those areas of a page.

  While this heat map is useful as a positioning guideline, we strongly recommend putting your users first when deciding on ad location. Think about their behavior on different pages, and what will be most useful and visible to them. You'll find that the most optimal ad position isn't always what you expect on certain pages.

  For example, on pages where users are typically focused on reading an article, ads placed directly below the end of the editorial content tend to perform very well. It's almost as if users finish reading and ask themselves, "What can I do next?" Precisely targeted ads can answer that question for them.

• It's also very important to decide how many ads to put (many ads will likely have a higher click rate, but they might annoy your visitors).
  
• Test, test, test! The best part of AdSense is that it's easy to track your results (see channels, below). So it's best to experiment, and see what works best. The best way to test is to use A/B testing. In this method, you switch scenarios randomly - one visitors gets scenario A and the second gets scenario B. Remember that your metrics can change because of many things (day of the week, holidays, recent updates, new advertisers joining the pool, etc.) so it's best to randomize all the time. Remember also not to make decisions based on little data.
  

Who can join?

Basically any web publisher can join AdSense. But there are certain AdSense policies and terms, make sure you read them first. For example, you must be 18 years old. And AdSense doesn't work in all languages (if you site is using a language that is not supported, it is not allowed to use AdSense).

Google's own share

Obviously not all the money earned from AdWords goes to you. Google keeps their own share. They do not tell us what it is - and it might be different for different publishers. Usually people talk about something like 70% going to the publisher, and 30% for Google.

Watch out! (click fraud)

You might be tempted to click on your own ads... it's an easy way to make money! But watch out. This is click-fraud, and one of Google's worst nightmare. They are doing their best to find out about people who abuse their system. And believe me - the world's most brilliant people work in Google, and it's highly unlikely that you will be able to fool them. They will quickly kick you out of AdSense, for good. Click fraud is also against the law, and you might be sued. Don't say I didn't warn you!

AdSense for search

Google allows you to put a search box in your site, which can be used to search your own site, or the whole web (or a certain number of sites). You might have seen this in other sites. When people use this search, google places Ads inside (just like in the normal Google web site), and you can get your revenue share.

Channels, statistics and more

Google provides some nifty statistics for your account. You can also choose some channels. Channels are 'tracking-code' you can put in your ad units. So you can have a different channel for the 'bottom-ad' and a channel for the 'top-ad' on your site, or a channel for the blog and a channel for the front page. It's all up you.

You can then get reports and statistics based on your channels. That's the way you can see what works and what doesn't, perform A/B testing, and optimize your site.

The reports given be Google are quite basic. I have written a software for AdSense publishers called AdSenseLog that gives you dozens of reports, graphs, and analyzing tools. It also monitors your account, and alerts you for changes, including email and SMS alerts. Here are some screen shots:

 

AdSenseLog can be downloaded and tried for 30 days. For small publishers, it's even free!

Another nice tool I have is the AdSense Toolbar. This is a free add-on to your Firefox or Explorer browser. It monitors your account, and includes several links, blogs and gadgets for web publishers. Give it a try!

Glossary

• CPC: Cost Per Click. The amount of money an advertiser will pay for each click. See EPC.
• EPC: Earnings Per Click: The amount of money a publisher will earn from each click.
  
• CTR : Click Through Rate: The percentage of people that click on an ad.
• eCPM: effective Cost Per Mil: Your effective revenue per thousand impressions.