A user of Problogger community contacted me asking;

I was reading your advice to Cadpro re: the Google Keyword Tool and CPC. I followed your directions and found that the keywords most relevant to my blog have a CPC of $4-8 or so. How does this help me earn money? I am so confused. Isn’t the CPC something an advertiser would pay? I am just trying to monetize my blog a bit by using AdSense effectively. Maybe it’s too late for me to be thinking about this and learning something new.

Can you help me out, please, or let me know where to go for help?

Here an insightful approach to this problem; before trying to increase cpc or cpm of your AdSense account is better to know how and why Google decides to pay more for a click to a specific publisher instead another one.

AdWords and AdSense CPC relationship

Adwords Google Keyword Tool let you find the most expensive keys for advertisers related to specific topics. The cost of each single click is split between AdSense and the publisher of the site where the users has clicked.

So, the higher the value that the advertiser pays the higher will be the gain of the publisher.

Why I earn just few cents for a click on a very expansive ad?

The goal of AdSense is business for its advertisers. The user’s behaviour on the advertiser’s website after clicking on an ad is very, very important.

If the user, after clickin, make an action on the website of the advertiser (a subscription, a contact request or a purchase)  AdSense will reward your website with ads more profitable, because it drives business to its customers.

This means that blog assure to the advertiser a return on his investment. This is the key to understand all the trick: ROI

But why the cost per click remains low in all of my blogs?

This mechanism that divide the good adsense publishers from the bad ones is called smart pricing, and it affects the whole AdSense account, not the website.

If you have several websites under a single AdSense account the one with low conversion rate can affect drammatically the others.

So, keep AdSense just on blog with a good cpc rate.

How to improve conversions to escape from the smar pricing trap

Just look at your website with the eyes of someone else: the ads on the post must be a complementary information for your users, not just advertising. This is possible only if Adsense contextualize properly the ads thanks to an insightful and relevant content.

Users with the higher probability to drive conversions are the ones who land into your blog looking for information trought the search engines. He’s searching for a product, for a service. He’s clicking around to satisfy a specific need.

So, the problem is not anymore how to force my users to ckick an ad, but how to convince Google to put my page in front of millions of eyes searching for something…

Adsense earning will be just a conseguence.

Photo Credit
Coins: Willi Heidelbach
Money chain: cre8tiv88
Few cents: strelok
Money targets: Mostafa Fawzy

Actually, whoever invests on online advertising, especially on pay-per-click programs such as Adwords, knows pretty well that this drop might be connected to the world economical crisis and understands the reasons why the clicks have paid less and less (not considering willingly other factors as smartpricing).

Photo Credit: Domen Colja

How cost-per-click is built

Advertisers using Adwords to promote their products/services in the Adsense circuit must, first, choose relevant keywords for the kind of ad they wish to be visualized. Those keys (simple words or phrases) are used to show Google the kind of website and post the advertiser wants theirs ads to be displayed on.

The next step is to insert in each key a certain cost to be paid for each click received on the ads linking to their services. As each Adsense block receives around 5 ads, what will happen if 1000 advertisers are willing to display their ads using the key-word? It’s simple: Adsense will prefer those who pay more per click.

In fact, for each key-word there’s a real auction in which who bids the highest will have more guarantees of seeing their ads displayed on websites and on more quality pages (which guarantees a higher ROI).

For the most popular and requested key-words, Adsense imposes a real limit, that is, a minimum value to be offered for only one click it won’t guarantee the ad to be shown if this value is lower.

In the image above, I offered one cent to have an ad displayed on a relevant page linking to a specific key-word, and further to the left, Adwords tells me that there’s no negotiation for less than 4 cents.

What’s the impact of advertisers competition on pay-per-click

It’s obvious: the higher the number of advertisers wanting to have their ads linked to one specific key-word, the higher the price of the cost-per-click, just like in a real auction, and the higher the minimum cost-per-click value demanded from advertisers will be in order to get into the competition.

The value of a single click depends by  the number of advertisers that bid at specific keywords (actually, there are other factors but I don’t want to complicate the things too much)

Check how much a simple click on a loans and financing ad is worth:

As you can see, the economical crisis has caused an increase of CPC on this kind of ad. To create this kind of report, use the KeywordToolExternal.

Drop on click costs

In times of economical crisis, there’s less money around to invest, therefore, budgets destined to advertising campaigns are cut down. Check the influence on the cost obtained per each click:

1. the number of companies investing on online advertising drops and that reduces other companies’s budgets
2. the number of competitors disputing for an ad to be displayed for a certain key-word drops as well
3. less bids on key-words mean less minimum bids, and maximum as well, consequently
4. online publishers (like you) are in for a drastic reduction on the average click revenue standing before an unchanged click through rate, or even a higher one sometimes.

In other words, it is like having a short audience auction: you can buy the object in question for a much lower price than the usual, what will make the seller (you) receive a lot less.

Some advice

The best thing to do is not to worry too much. In a year’s time, a lot of factors can be chained to determine the increase or fall of online revenues.

It is advisable to strictly evaluate your costs on a yearly basis, otherwise, you’ll take the risk of making choices based on the heat of the moment which, besides not being helpful, can cause things to get worse if there are changes in the mechanisms unrelated to revenue drops.

1. AdSense

AdSense  is the best pay per click affiliate program for sure. The best features are the huge announcement variety and the very effective contextualization mechanisms. Another strong point is his dynamism, which rewards the most authoritative web sites with a higher click remuneration and penalizes web sites with poor contents. This mechanism is called Smart Pricing and update the price for click each week.

• Ads type: text ads
• Ads selection: contextual
• Minimum traffic amount: no.
• Language: almost all
• Earnings type: Pay per Click
• Advantages: Reliability and optimal remuneration
• Disadvantages: Possibility of being banned due to events outside of your control
• Take care about: Smart Pricing. Adsense can provide a hug earning range: it can make you rich, or really sad.
• Payments: Check, wire transfer
• Subscription: http://www.google.com/adsense/

It’s one of the most popular links exchange and text ads advertising program. It displays announcement blocks like AdSense, but not in contextual way. It is possible to select network Ads or only direct links, which advertisers buy on the publisher web site. AdBrite recently introduced InLine advertising (links to the words of web page text).

• Ads type: text ads, InLine ads and Intertitial
• Ads selection: selected by categories
• Minimum traffic amount: no
• Language: almost all
• Earnings type: Pay Per Click and Pay Per Impression
• Advantages: it manages text ads and links selling in the same time
• Disadvantages: Lack of ads for non-english web sites.
• Take care about: Video ads are recently available
• Payments: check
• Subscription: https://www.adbrite.com/mb/commerce/register_form.php

It’s an affiliation program for contextual ads and inline ads. It has a good advertisers variety and the earning chance is not bad. Most common languages are available, but each language has its own web site with enrolment rules, tos etc.

• Ads type: annunci testuali e InLine
• Ads selection: contextual
• Minimum traffic amount: no
• Language: almost all but Portoghese (strange…)
• Earnings type: Pay Per Click
• Advantages: Nice interface for ads customisation. Good earnings.
• Disadvantages: No clicks number into the reports
• Take care about: Support seems slow
• Payments: Wire transfer
• Subscription: http://www.miva.com

It is one of the most popular contextual affiliate programs for InLine ads. Unfortunately he only accepts sites in English language. I am testing it from little and it seems to have a good performance, even if it’s not comparable with AdSense earnings. In any case it’s a good AdSense competitor. It allows to highlight the text on which contextualize and display Inline ads. It can be used together with AdSense like the others InLine programs (but it’s always better ask for confirmation to the AdSense support).

• Ads type:  Inline
• Ads selection: contextual
• Minimum traffic amount: no
• Language: English
• Earnings type: Pay Per Click
• Advantages: It allows to customize the underline colour
• Disadvantages: It accept English web sites only
• Take care about: it’s impossible to update your user data online
• Payments: check
• Subscription: http://www.kontera.com/mainform.aspx?type=1

It’s a Pay Per Performance affiliate program; it pays each time a user performs a specific action (lead, buy, contact etc). It has a huge list of publishers with a big number of banners, images and textual announcements to be manually inserted into web pages. You need to be authorized by each advertiser in order to promote their services. Imho it does not work on content web site.

• Ads type:  Images,  Flash movies and text
• Ads selection: manual
• Minimum traffic amount: no
• Language: Almost all
• Earnings type: It depends from advertiser (sell, lead or other. There’s few pay-per-click ads)
• Advantages: There’s a lot of publisher with terrific ads management tools
• Disadvantages: I don’t trust their stats.
• Take care about: When an advertiser does not pay Tradedoubler, the publisher (you) is not paid. It happens too much time in my opinion…
• Payments: wire transfer
• Subscription: http://www.tradedoubler.it/pan/login?action=register

Google has recently opened to Inline affiliate programs together with AdSense, but with the limitation of different layout and colours. If you want to take this chance you would in any case follow the rule number 1 of each AdSense publisher;

1. Ask for confirmation personally to the AdSense support
2. Print the positive answer
3. Keep it in a secure place, in case you’ll unfortunately need to use it