There are a lot of people on the Internet claiming that they have made a good fortune out of Google AdSense from their websites. Some of them go even further to show the checks they've received as a proof. Few people would remain untouched, after seeing those checks. They all want you to believe in their claims, so that they can continue on selling you their secrets for success. As an engineer, I am usually skeptical of those claims. I never believe in quick fortune, not because no one has done that - in fact, some have, but because I've also seen lot of "what comes fast goes fast."
Let's not let my personal beliefs stay in your path to success on the Internet. Let's look at only numbers and the facts to see what fortune one could possibly make out of Google AdSense. To keep it simple, I'll focus only on the contextual-targeted ads of Google AdSense which is Pay-Per-Click (PPC)-based advertising. That is, the ad publisher gets paid a portion of the advertising revenue, when the visitor clicks the ads. In this context, the key factors that directly determine how much revenue the publisher makes are the click-through rate (CTR) and the average cost per click (CPC).
What is Click-Through Rate (CTR)?
Before explaining how the CTR is calculated, we have to talk about page impressions. Briefly speaking, the term "page impression" refers to the number of times the visitor arrives at a page in which the ads are displayed. It is not related to how many ads are displayed. Behind the scene, there is a piece of JavaScript embedded in the web page that displays the ads provided by Google and redirects the visitor to the advertiser's website, when an ad is clicked. Google keeps track of both the number of times the script has requested to display the ads and the number of times when an ad is clicked. The CTR is then calculated by formula (1):
CTR = Number of Clicks on the Ads / Page Impressions (1)
What is Cost-per-click (CPC)?
CPC represents the cost that the AdWords advertiser pays for the keywords related to your websites or the clicks on the displayed ads. CPC varies primarily based on business competition among the advertisers. It can also be seasonal and related to the formats of the ad, such as, text, image, or video. In the context of this discussion, CPC refers to the portion of the advertising cost that Google passes on to the publisher, when the visitor clicks on the ad.
The revenue formula and examples
Given CTR and CPC, the ad revenue is calculated using the following formulas:
Revenue = CPC * Number of Clicks (2)
Revenue = CPC * CTR * Page Impressions (contextual) (3)
So, what's the average CPC and CTR? There are no clear references. Many sources have posted different numbers, which vastly depend on their sampling websites and the approach used. Most of the CTR numbers fall in between 1% and 5%. I'll use a couple of numbers for the average CPC just to get some sense about the kind of ad revenue we would expect. Keep in mind that you could equip your websites with multiple streams of advertising income, such as, placement-targeted ads or affiliate sales. Also, note that I did not qualify these data with a time frame.
Table 1: Ad Revenue Examples
| CPC | CTR | Page Impressions | Revenue |
| $0.10 | 2% | 1,000 | $2 |
| $0.10 | 5% | 1,000 | $5 |
| $0.10 | 5% | 10,000 | $50 |
| $0.25 | 2% | 1,000 | $5 |
| $0.25 | 5% | 1,000 | $12.5 |
| $0.25 | 5% | 10,000 | $125 |
| $0.25 | 5% | 1,000,000 | $12,500 |
What do we learn from the above examples?
Looking at this table, you probably are not impressed by the amount of ad revenues you could make. The problem with those Internet marketers showing off their big checks is not that it can't be done, but that they make it sound so easy and quick. They tell you that you can build a content rich website with high paying keywords in ten minutes and start making money right away. (Watch out for plagiarism!) I have also seen many low-quality websites that simply pull the content from all over the places like article directories or some mail archives only to see if I happen to click one of those ads. Upon arriving at one of those sites, I typically say "Oops!" to myself, click on the Back button, and run away. Just for fun, you may notice that many of those sites don't even update their copyright notice at the bottom of the page. Or, they don't even have one.
I recall that I came across a personal blog site that had PageRank at 6/10."I didn't intend to make money, when I first started building this website. I focused on producing the right content and the services valuable to my visitors. The traffic just took off after two years." said the author. That's the attitude that creates a long running business and hence a sustainable income.
In any case, one thing is clear: We, the ad publisher, don't have much control over the CPC. But, we have some control over CTR and a lot to do about increasing page impressions. The most effective way to raise CTR is perhaps to make sure that the ads Google provides are relevant to what your visitors are looking for. This can be achieved by implementing domain focused and specific content for your websites or blogs are very domain specific.
I'm not talking about using key words or artificially repeating the key words all over the place in your web pages. The search engine has grown very sophisticated as to determine how relevant your content is relevant to a specific subject and how creditable your website is. Your content shall naturally incorporate the right key words or relevant phrases, if it is written about a specific topic and readable by human. Although I agree it's important to research the market using key words, I would not recommend you to build a website or start a blog with sole intention to focus on the high paying key words.
Rather, I'm talking about maintaining a clear theme to the content you published on a particular site. For example, it is better for you to create separate blogs to discuss dogs, investments, and your other favorite topics than all in one single blog. Mixed content makes it difficult for the search engine to determine which ads are best to display for the visitors to your website.
Obviously, the page impression or the site traffic is what we all should be working on. One can invest in marketing programs to promote his or her sites or in search engine optimization (SEO) to improve the page ranks. Without the credible content or service, though, it would be hard to have your visitors stay on or come back. Without the sense of trust, the visitors wouldn't even try to poke around your site and read your content, needless to say that many of them have gradually become "ad blind." So, spend time producing unique content, goods, or services, before investing in any serious marketing campaigns or SEO.
I've learned a lot from some of those books listed under On-line Advertising at your right; such as, Pay Per Click Search Engine Marketing for Dummies, Google AdSense for Dummies, and Google AdWords for Dummies. You may want to check them out, too.
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