How Google Adsense and Adword Work
Published by fongrich on Tagged Understanding AdsenseIf you surf the net, you have seen Adsense. It’s the ads that Google serve on affiliate websites. Each time you click on the ad, the publisher/webmaster gets a share of the ad cost and Google gets a share. I am not sure what percentage, because Google doesn’t share that information. Adword is what advertisers use to bid on keywords to place to ads throughout Google search engine and Google publishers to Adsense.
Each system sounds simple, and they’re pretty simple to use. However, there are a lot of details that goes into each system to really master and maximize profit. For example, you can bid on cheap keywords through Adword and when users go to your site, and they click on more expensive keyword ad; You make a little money between the spread. That’s called arbitrage.
The important thing with each system is “keywords.” You live and die by your keywords. Certain keywords are much more expensive than others. General keywords are usually more expensive. When you narrow down the keyword, it gets less competitive and more relevant. That’s what Google wants. For example: ‘Dating’ is a very expensive and general keyword. While, ‘single parent dating’ is much more precise and is cheaper. You’ll want many specific keywords to master both systems. There are books and information products out there that explain Adsense and Adword in great details.
For Adsense, there’s also something called Smart Pricing. Google is able to analysis the quality of clicks that goes through your website. They value the clicks by actions they take. If you have most of your click taking non-action, they’ll pay you much lower for the cost of the ad and pass that to the advertiser as well. So it’s important to have qualified visitors who are actually looking for the relevant ads.
Additionally, I have heard rumors that Google is slowing doing away with Pay Per Click (PPC) and moving into Pay Per Action (PPA). PPA means the ad will be paid only when the user takes action resulting in opt-in lead or sale. This will eliminate 2 things. Click fraud and arbitrage. I am not sure how everything will pan out, but things are about to change. I am sure Adsense will be affected. I’ll let you know when I know more.
July 31st, 2006 at 9:00 pm
Great article, I had learned most of this on my own over the last year. It compiles it into one article. Oh, I didn’t realize how somethings are so seasonal yet others are not, thanks for pointing that out.