Google Advertising Tools: Cashing in with Adsense, Adwords, and the Google APIs

5.2. Understanding Contextual Relevance

The basis of CPC advertising is having visitors to your web site click the links presented to them by ads. People are likely to notice ads, and click on ad links, only if the content of the ad is relevant to their current interests. This leads to the notion of contextually relevant advertising (usually referred to simply as contextual advertising) often being confused with CPC advertising, even though the two are not the same.

As I've already made clear, CPC ads don't have to be contextually relevant. But totally unrelated ads look odd on a web page and are unlikely to be clicked. How often would you interrupt your train of thought to click on an ad for "contact lens cleaner" when you are reading a site about C# programming? So as a web site publisher you are best off sticking with CPC programs, such as Google's AdSense, that do, in fact, provide reasonably good contextual placement.

How good, in fact, are these placements? It all depends; see the box "Contextual AdsNot!" later in this chapter.

5.2.1. Serving Ads

How are ads placed on contextually relevant pages? As you can imagine, it isn't done by a roomful of gnomes scanning web pages and deciding what ads should go on them. There are simply too many web sites and web pages, and their content changes too quickly, for this to work (even if you had a few gnomes).

Even with print media, such as newspapers and magazines, it makes sense to position advertising near contextually relevant editorial material (although it is not always possible). The manual mechanism that I mock (albeit using humans instead of gnomes) has always been used to try to come up with the best placement of ads, called ad imposition, in traditional print media.

Obviously, software, not gnomes, is used to automatically analyze the content of a web page to determine its content and which contextually relevant ads should be placed on it. This is fortunate for Google (and other search engine companies) because determining the content of a site for contextual ad relevancy is essentially the same task as determining the content of a site to match with the keywords used in a search.

To make it easier for Google's AdSense and other contextual ad programs to accurately determine the content of your web pages, it's important that you follow the guidelines for web site and page optimization explained in Chapter 3.

Here's generally how the process of placing a contextually relevant CPC ad on your site works:

  • A block of code on your web page calls a script on the server provided by the contextual ad program. This code also contains your tracking ID (discussed in Chapter 8) so the ad program knows who to pay when the ads are clicked.

  • This code is activated when users load your web page in their web browser.

  • The activated code invokes the script on the server. When the script is invoked on the server, the content of your page is analyzed. This process usually involves some time delay the first time; generic ads may appear until the server has had time to look at your web page. Once your page has been analyzed, the server doesn't have to parse it again (unless the page content changes, in which case there may be a time lag before the contextual ads have caught up with the new content).

  • The software decides which ads to serve based on its analysis of your web page content.

  • The designated ads are generated as HTML and served on your page.

These logistics behind serving contextual ads are shown in Figure 5-1.

Figure 5-1. The program that generates the contextual ads figures out which ads are relevant and generates the HTML to display them on your web page

5.2.2. Dollars and Cents

The amount of money generated by an individual click on a contextual ad is a highly variable and murky business. In the case of Google and other contextual programs, the amount that is paid for an ad depends on an automated bidding process where advertisers bid for keywords. So the amount paid for a contextual ad varies day-by-day and even hour-by-hour.

Google's terms of service (TOS) forbids the disclosure of any financial information about how much is made off the AdSense contextual ad program except an accurate account of the total paid to a publisher.

Essentially, a contextual ad program such as Google is acting as an agent or a broker: ads are sold by keyword to advertisers and publishers are paid on the basis of click throughs (see Chapter 7 for the details of Google's role as a broker). But Google doesn't say what percentage commission it takes, or what share of the pie it leaves for you, the web publisher. If you sign up for Google's AdSense, the leading contextual ad program, you just have to take what Google gives you, and trust Google.

Contextual AdsNot!

For the most part, CPC contextual ads are very reasonably positioned. For example, it's completely appropriate to display an ad for a Microsoft developer's site on a web page devoted to C# programming.

However, sometimes the engine that figures out contextual relevance is just way off-base. Most often, the cause is reliance on a keyword that doesn't really represent the content of a page. Here's an actual example: in a web page about digital photography, one photograph (of many shown) was captioned to indicate that it showed a child in a bathtub. The Google AdSense contextual ads for the page were for plumbing supplies, claw-foot bathtubs, and so onall utterly unrelated to the content of the page (and ignoring the real context of the mention of the word bathtub, which was about the photograph, not the tub).

Premium Google AdSense accounts, meaning those with more than 5,000,000 page views a month, have some mechanisms for controlling ad subject matter, but short of having this kind of clout, the best way to direct the content of ads on your page is to construct your web pages following the guidelines explained in Chapter 3 and to provide a contextually accurate list of meta tags.

A related issue comes up when your web pages feature controversial material and ads placed by opponents of your viewpoint. For example, I wrote a series of blog posts blasting the rhetoric around "intelligent design." These posts kept drawing ads from antievolutionists, in other words, people and organizations diametrically opposed to my viewpoint.

Although AdSense and other contextual programs do allow you to block specific web domains from advertising on your site (this is supposed to be used to keep competitors off your site), there's nothing much you can do about advertisers with ideology you don't like, except grinning about the fact that if anyone clicks, the advertiser is paying for a context that will most likely be counterproductive for its ads.

As companies go, Google is probably pretty trustworthy. Based on other CPC programs, the commission on contextual ads is between 25% and 75% of the total paid by the advertiser. (I know; that's a pretty big range!)

An individual click on a contextual ad is not going to make you rich. The net value to a web publisher of a click ranges from one or two pennies to a few dollars at the very high end. The average click is probably worth about $0.20. Combine this statistic with the fact that the click-through rates (the clicks an ad gets divided by the number of times it is served) are in the low single-digit percentages2% is a quite respectable CTRand you come up with the fact that to make good money from CPC, you need a lot of traffic. A six-figure income from CPC contextual advertising is not unheard of, but it takes monthly page views in the millions. Doing the math, this page-view volume implies either a broad site or some highly trafficked pages (or both).

Supposing you have a great deal of contentsay 10,000 pagesit's possible to reach the target volume of more than 100,000 page views per month with an average of 10 page views per page per monthambitious, in terms of the amount of content, but not impossible, and quite modest in terms of the traffic per page.

These 100,000 page views per month might theoretically give you an income of around $400 a month calculated by multiplying 100,000 times the 2% CTR, times the $0.20 average fee per click.

Of course, most sites are created to fulfill multiple needs and use a variety of mechanisms to generate income. But if your only consideration is creating revenue using a contextual CPC model, you should consider whether it makes more sense to get to 100,000 page views and beyond by creating a relatively few heavily visited pagesthe shallow-site approachor a great many, less trafficked pagesthe broad-site approach .

If you take the broad-site approach, then you'll need to figure out a low-cost way to generate the content. The calculation that shows a $400 monthly revenue for a 10,000-page sitea broad site that is not heavily traffickedimplies a revenue stream of about $0.50 a page per year. For this to make sense as a business proposition, it can't cost you very much to generate this content (perhaps because you create it yourself).

Business modeling is only as good as its assumptions. If the hypothetical 10,000-page site averages 100 views per page rather than 10 views per pagenot at all unreasonable for a worthwhile sitethen the economics shift radically in favor of the site publisher. The site is now probably generating $50,000 or so annually in CPC contextual revenue (each page contributes an average of $5.00).

The point here is to understand the implications of site and advertising metrics on the economics of your site so you can take the steps required to meet your financial goals.

Site metrics, CPC advertising, and profitability are discussed further in Chapter 9.

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