## Thursday, February 16, 2012

Google Adsense is a tricky tool to try to make money with because there are potentially many ways to optimize content and it can be extremely difficult to attract both the right audience and the highest cost per click (CPC) ads. Often it feels like trying to make money with a blog is a waste of time, but there are individuals who are able to make many thousands of dollars per month in passive income from blogging. The question is often "how do they do it?" The answer is very easy to explain, but extremely difficult to implement because there are many factors relating to the popularity of your site and/or your blog that are outside of your control. In a lot of ways it is like running a presidential campaign without having control over any advertising channels.

Search Engine Optimization (SEO)

There are many books and websites devoted to Search Engine Optimization (SEO) and a number of them I have read myself. They all essentially say the same thing in slightly different ways. A few of the key principles that are communicated are:
3. Generate more traffic to your site
4. Create good content
These are written in order of decreasing importance. Don't believe me?... Dig around for about 5 minutes with different keywords and you will find many sites with useless content that manage to beat legitimate useful sites on search engines (one example is "windows drivers," you get a large number of useless driver "update utilities" and very few PC manufacturer's sites in the top results) .

Search engines and crawlers don't have a good heuristic approach to determining if a site is actually good content, instead they pick up on measurable metrics involving keywords, incoming links, and content freshness. Not to be unduly hard on search engines, most people can't really come up with a definition for 'good' content (the definition often involves synonyms of 'good' and 'content' leading to a definition of a term that is in it's own definition...). Unfortunately, since people can't do it well, we can't really expect a machine (or large network of machines) to do any better. This gets even more complex with some of the different black hat SEO strategies that are employed, such as providing different content to users and crawlers.

The real key to search engine optimization and generating traffic goes back to some of the fundamental ideas in marketing. Since I did an undergraduate degree with three minors (focusing on economics, applied math, and Russian studies) and an MBA in business and accounting, I had to take a couple of classes in marketing (though they weren't my best grades). At the time I didn't think they were particularly useful and I had a rather strong distaste for marketers and advertising, but when I look back the concepts are fundamental to building a successful ad supported blog or ad supported website. Website optimization falls into the 4 Ps (I touch on them now, but I'll explore them more in a later post):
1. Product - This is the content that you are providing.
2. Price - This is the price that advertisers are willing to pay to target the keywords in your site.
4. Promotion - Your effectiveness with generating incoming traffic through incoming links and good search engine optimization.
Let's take an example of an unsuccessful AdSense post below that I created on adding Hyperterminal from a Windows XP/Server 2003 system to a more modern version of Windows (Vista/Server 2008 R2). It is a fairly successful post that brings in over 100 hits per day, but initially even though the click through rate (CTR) was high, the revenue generated was unacceptably low (averaging 1-2 cents per click, averaging around 14$per year). Google Analytics reported how the page was doing on a typical day: So I took a little bit of my accounting knowledge and decided to follow the money. Advertisers pay Google a certain amount based on ad clicks and costs per 1000 impressions (CPM). Advertisers bid for specific keywords and the highest bidders get the best placement and the largest number of impressions while lower bidders get worse placement and fewer numbers of impressions. Advertising through publishers and through its search engine and other online portfolio (Google Voice, Google Docs, GMail, etc) is the primary way that Google makes its money. Advertisers pay a higher cost for more targeted and more competitive keywords. Google in turn pays publishers (bloggers, website owners, etc) a certain percentage of the per-click amount for clicks and the per-CPM amount for hosting the ads. The end amount that publishers receive for clicks and impressions is directly proportional to the amount that advertisers pay. Currently publishers have no visibility into what content will generate the highest revenue, but it is possible to take a reasonably good guess with the AdWords keyword tool. This tool provides Adwords advertisers approximate per-click costs for specific keywords and closely related keywords (known in the Google world as keyword ideas). Going back to my poorly performing HyperTerminal post, I decided to look at the highest CPC keywords around the HyperTerminal keyword and retrieved the list below. I rewrote the post with some of the original content and incorporated content around the top 7-10 CPC keywords reported by the AdWords keyword tool. Within a couple of weeks I noticed a difference that each click was generating a little less than 50 cents per click (around 25 times more than each click before the revision). In this case, the CTR went down, but I'd estimate that this post will make a little over$200 per year for the time that people are still interested in HyperTerminal. This is a  roughly 1400% increase from the previous projected amount. Looking back at Google Analytics, the increase is reflected in the Adsense Pages report.

There are a lot of factors that affect AdSense revenue for a publisher and many of them I am still exploring myself. Improving the keyword targeting of your site/blog/article can have a profound effect on the CPC for AdSense ads served on your site and can increase your revenue significantly.