KnowVertical Blog

AdSense - Understanding How It Works...

Many bigger publishers or broad network entrepreneurs come into the planning around their network with one big mistaken assumption.  This assumption has existed in the market now for many years, and when people are presented with the truth they are usually shocked.  The problem with this ongoing myth is it is getting more and more off base from reality and has a real risk of having your business models for your networks far off of reality.

Over the past few years this misconception has had ripple effects on sites and on network operators and in many cases has had a dramatic impact on their business plans and financial models.  What is the misconception you might say?  Okay, enough of the drama!

The biggest misconception in the market today has to do with Google AdSense.  Most people in big sites or with limited multi-category experience with AdSense have strong beliefs that the effective CPM paid by Google is extremely low and way below the market rate would be for the similar ad spaces on an open market. 

Most large publishers have the belief that small sites are making pennies on the dollar with AdSense and  that even with a CPM less than a dollar that the network operator would be blowing out the marketplace and publisher expectations. These assumptions make sense, why would random text ads on my blog about my kids be really worth anything to a direct response advertiser?  Why would random text ads showing up along side the video or funny joke I sent my buddies really bring more than a few pennies to the hosting website?  But this is not what you are going to build your ad network on, most likely, and Google AdSense was developed to match advertiser’s goals to consumers.

Yes, there are many cases where Google is paying a ridiculously low rate for their member sites text and image ads.  Rates in the .10 to .25 range for CPM's is not out of the norm for sites that have heavy traffic with low specificity of content (aka focus).  There is a general AdSense effect on pricing of the ad space, depending on a few variables. 

The most important variables in how well AdSense performs are how specific or targeted the content is on the site.  This doesn't translate to sites just about Mesothelioma (the top paying keyword for years on Google); it actually includes all major high value categories online, such as Travel, Business, Financial and more.  This effect also holds true for highly targeted content, for example a site about bed and breakfast hotels in upper Maine targeted toward families with kids would potentially get very high payout due to the very specific content on the site. 

The second variable that has a pretty dramatic effect on how well Google AdSense will pay is how big and how many pages the site has (overall traffic).  The more users and the more pages the less effective the overall advertising will perform on the site.  Though Google has over one million small businesses buying on their keyword product, there is still the potential to run out of high performing/paying ads for the site. 

So if you are recruiting a broad category network that has a lot of general keywords, such as viral entertainment sites, and many of the sites are more vanilla in content, the Google AdSense program will probably be on the very low end of performance.  Most of these sites will also be in other remnant programs to help supplement their revenue, thus even diluting the effectiveness of the AdSense ads more.   

Check out the other post on some of the remnant eCPM's that are currently being aid in the market.  Though the marketplace is constantly changing, the base rules have been consistent for years.  The main message is not to get stung with the AdSense surprise.  The best thing to do when working on an overall model for the network you are building is to do some more detailed research into your marketplace.  Don't rely on just your sites performance on AdSense, as you will be surprised when you realize that some of the sites you are interested in recruiting into your network are making $50+ eCPM in AdSense. 

What we suggest you do if you run into a site that has a high AdSense payout (eCPM), have the site create a new ad unit for your brand sales.  Though you might have to negotiate a different placement, it at least gets them into your sales kit and your network directory.  Remember that the key to a successful network launch is to find creative solutions for the market.

Many bigger publishers or broad network entrepreneurs come into the planning around their network with one big mistaken assumption.  This assumption has existed in the market now for many years, and when people are presented with the truth they are usually shocked.  The problem with this ongoing myth is it is getting more and more off base from reality and has a real risk of having your business models for your networks far off of reality.

Over the past few years this misconception has had ripple effects on sites and on network operators and in many cases has had a dramatic impact on their business plans and financial models.  What is the misconception you might say?  Okay, enough of the drama!

The biggest misconception in the market today has to do with Google AdSense.  Most people in big sites or with limited multi-category experience with AdSense have strong beliefs that the effective CPM paid by Google is extremely low and way below the market rate would be for the similar ad spaces on an open market. 

Most large publishers have the belief that small sites are making pennies on the dollar with AdSense and  that even with a CPM less than a dollar that the network operator would be blowing out the marketplace and publisher expectations. These assumptions make sense, why would random text ads on my blog about my kids be really worth anything to a direct response advertiser?  Why would random text ads showing up along side the video or funny joke I sent my buddies really bring more than a few pennies to the hosting website?  But this is not what you are going to build your ad network on, most likely, and Google AdSense was developed to match advertiser’s goals to consumers.

Yes, there are many cases where Google is paying a ridiculously low rate for their member sites text and image ads.  Rates in the .10 to .25 range for CPM's is not out of the norm for sites that have heavy traffic with low specificity of content (aka focus).  There is a general AdSense effect on pricing of the ad space, depending on a few variables. 

The most important variables in how well AdSense performs are how specific or targeted the content is on the site.  This doesn't translate to sites just about Mesothelioma (the top paying keyword for years on Google); it actually includes all major high value categories online, such as Travel, Business, Financial and more.  This effect also holds true for highly targeted content, for example a site about bed and breakfast hotels in upper Maine targeted toward families with kids would potentially get very high payout due to the very specific content on the site. 

The second variable that has a pretty dramatic effect on how well Google AdSense will pay is how big and how many pages the site has (overall traffic).  The more users and the more pages the less effective the overall advertising will perform on the site.  Though Google has over one million small businesses buying on their keyword product, there is still the potential to run out of high performing/paying ads for the site. 

So if you are recruiting a broad category network that has a lot of general keywords, such as viral entertainment sites, and many of the sites are more vanilla in content, the Google AdSense program will probably be on the very low end of performance.  Most of these sites will also be in other remnant programs to help supplement their revenue, thus even diluting the effectiveness of the AdSense ads more.   

Check out the other post on some of the remnant eCPM's that are currently being aid in the market.  Though the marketplace is constantly changing, the base rules have been consistent for years.  The main message is not to get stung with the AdSense surprise.  The best thing to do when working on an overall model for the network you are building is to do some more detailed research into your marketplace.  Don't rely on just your sites performance on AdSense, as you will be surprised when you realize that some of the sites you are interested in recruiting into your network are making $50+ eCPM in AdSense. 

What we suggest you do if you run into a site that has a high AdSense payout (eCPM), have the site create a new ad unit for your brand sales.  Though you might have to negotiate a different placement, it at least gets them into your sales kit and your network directory.  Remember that the key to a successful network launch is to find creative solutions for the market.

Many bigger publishers or broad network entrepreneurs come into the planning around their network with one big mistaken assumption.  This assumption has existed in the market now for many years, and when people are presented with the truth they are usually shocked.  The problem with this ongoing myth is it is getting more and more off base from reality and has a real risk of having your business models for your networks far off of reality.

Over the past few years this misconception has had ripple effects on sites and on network operators and in many cases has had a dramatic impact on their business plans and financial models.  What is the misconception you might say?  Okay, enough of the drama!

The biggest misconception in the market today has to do with Google AdSense.  Most people in big sites or with limited multi-category experience with AdSense have strong beliefs that the effective CPM paid by Google is extremely low and way below the market rate would be for the similar ad spaces on an open market. 

Most large publishers have the belief that small sites are making pennies on the dollar with AdSense and  that even with a CPM less than a dollar that the network operator would be blowing out the marketplace and publisher expectations. These assumptions make sense, why would random text ads on my blog about my kids be really worth anything to a direct response advertiser?  Why would random text ads showing up along side the video or funny joke I sent my buddies really bring more than a few pennies to the hosting website?  But this is not what you are going to build your ad network on, most likely, and Google AdSense was developed to match advertiser’s goals to consumers.

Yes, there are many cases where Google is paying a ridiculously low rate for their member sites text and image ads.  Rates in the .10 to .25 range for CPM's is not out of the norm for sites that have heavy traffic with low specificity of content (aka focus).  There is a general AdSense effect on pricing of the ad space, depending on a few variables. 

The most important variables in how well AdSense performs are how specific or targeted the content is on the site.  This doesn't translate to sites just about Mesothelioma (the top paying keyword for years on Google); it actually includes all major high value categories online, such as Travel, Business, Financial and more.  This effect also holds true for highly targeted content, for example a site about bed and breakfast hotels in upper Maine targeted toward families with kids would potentially get very high payout due to the very specific content on the site. 

The second variable that has a pretty dramatic effect on how well Google AdSense will pay is how big and how many pages the site has (overall traffic).  The more users and the more pages the less effective the overall advertising will perform on the site.  Though Google has over one million small businesses buying on their keyword product, there is still the potential to run out of high performing/paying ads for the site. 

So if you are recruiting a broad category network that has a lot of general keywords, such as viral entertainment sites, and many of the sites are more vanilla in content, the Google AdSense program will probably be on the very low end of performance.  Most of these sites will also be in other remnant programs to help supplement their revenue, thus even diluting the effectiveness of the AdSense ads more.   

Check out the other post on some of the remnant eCPM's that are currently being aid in the market.  Though the marketplace is constantly changing, the base rules have been consistent for years.  The main message is not to get stung with the AdSense surprise.  The best thing to do when working on an overall model for the network you are building is to do some more detailed research into your marketplace.  Don't rely on just your sites performance on AdSense, as you will be surprised when you realize that some of the sites you are interested in recruiting into your network are making $50+ eCPM in AdSense. 

What we suggest you do if you run into a site that has a high AdSense payout (eCPM), have the site create a new ad unit for your brand sales.  Though you might have to negotiate a different placement, it at least gets them into your sales kit and your network directory.  Remember that the key to a successful network launch is to find creative solutions for the market.

Comments

[jeff paul]

well i must say thanks for bringing this to my attention - I’ve reviewed it myself now. A very enjoyable read

[meg]

Hi. Great post! Very insightful as we work to detail out a revenue model for our own site. Quick question. How do you think AdSense will fair on a site that is vertically focused and within that offers specific sections for product reviews, blog, and a library of how-tos? Is this content specific enough to provide good value and targeted ads? (not the url listed below)

[rob, BtG]

good info, review thanks. check out VideoEgg's new ad unit, sounds compelling...

http://www.blogtogreat.com/2009/04/ad-network-video-egg-announces-twig-new-adframes-unit.html