Saturday, April 22, 2006

How Does AdSense Work?

First, Adsense is one half of a Google advertising program. As you have a blog, I'm assuming you know who Google is (the company that sponsors your blog or provides you the ability to create a blog for free). The other half of the program is called AdWords.

AdWords -> is directed towards Advertisers
AdSense -> is directed towards publishers (anyone with a website or blog)

Google sells ad/copy space to advertisers through the Adwords program. They purchase this space from publishers, such as yourself, through Adsense. Unlike traditional advertising, Google does not charge their advertisers to place their advertisements in a box or rectangle on a website. Instead they charge their advertisers, every time a reader (anonymous person on the internet) clicks on the advertisement. The amount of money that Google charges an advertiser for a reader's mouse click on an ad, depends on the going rate of advertising for the type of informational content on the website.


Starts w/ Adwords
The going rate for advertisements related to DVD players is selling for $0.05 per click in Google's Adwords program. (an online retailer) decides to purchase $1000 worth of advertising from Google for ads to be 'targeted' on websites that have content about DVD players. Overstock places a bid for this at $0.04 per click (just under the going rate)

Google accepts's bid and the deal is completed in AdWords. Overstock uploads their advertising script to Google, which will prepare to zap that across the internet to any websites that have DVD player content. As has paid $1000 for click throughs at 4 cents per click, this means they have prepared or prepaid for 25,000 clicks (called page impressions by Google). This means that Overstock will only pay the $1k once 25,000 people somewhere/somewhen on the internet have clicked on an ad. The ad when clicked upon will take that internet viewer directly to's website, where Overstock will attempt to sell them a DVD player and maybe something else.

AdSense Comes into Play
So you as an internet publisher (that's what you became when you created a blog :), do some research, and decide that you'd like to sign up for Google's Adsense (publisher) program. [I'll describe the sign up process in more detail below] You complete the sign up, and Google gives you access to their website where portions of html code [software program code designed for the internet browsers such as internet exlporer, the same code that powers your blog site and makes it look nice on the internet instead of just a bunch of lines and words run together].
You as the publisher highlight this code, and copy it, and then you open up the 'template' for your blog. You determine the area within your blog where you want the advertisement to show up, and you paste the code in that area. You then hit the preview button to insure that your blog with advertising still looks good and there are no errors. Once you have confirmed the look, you hit Save Template & Publish and your blog template is updated to include advertising code which will generate Google ads.
Now one day you happen to write an article. Lets say you write something that talks about the movie Narnia: The Lion, the witch and the wardrobe. In your article you descriptively refer to your 'DVD Player'. You publish your article to your blog and the article is now available on the internet. Google runs programs, called, 'bots' or 'sniffers' that read your blog as well as many of the webpages all over the internet. They do this so that their search engine will constantly have the best info available and they also do it so that they can 'target' their advertising through the adsense program.
As Google reads your artilce, the bot notices that you have a keyword 'DVD player' in your article. This information gets recorded in a Google database, and Google later looks through their Adwords and Adsense databases. They are looking to see which advertisers need advertising for the keyword 'DVD Player' and which publishers have websites with content related to DVD Player. They happen to make a match when they realize that is advertising for the keyword 'DVD Player' and that you are now an Adsense publisher that also has an article that mentions DVD Player. So Google reads the html code in your website that and everytime someone opens your site the html code points to a Google Ad, which appears now on your website in the location you dedicated to it in your template.
You receive 100 visitors to your website, and 10 of them read your article about Narnia that mentions a DVD player. One of the 10 people think to themselves, I need a new DVD player. They see the ad for DVD players, and they click on it. This surfs them over to Overstocks website. They may or may not buy a DVD player from Overstock, however Overstock has just realized the benefit of the Ad. Google has tracked the fact that a visitor from your site clicked on the ad. They charge Overstock $0.04 for that single click. Google receives $0.02 (2 cents), and they pay you the publisher $0.02 (2 cents). Its a 50/50 split!

A day goes by and you login to your Google account to check your balance. you see that you just made 2 cents. You think to yourself well that was pretty easy. You keep writing articles, more ads that relate to your articles show up, a portion of your readers occassionly click the ads and you and Google receive payment.

End of Example

Reflection on Example
OK, so it sounds like easy money. It is. It sounds like you could make a lot of money. You could. Does this happen to everyone? No, not really. The reality is that you can sign up for Adsense, and you may not make a lot of money. It depends on how many readers or visitors you receive to your website and how many of them actually click on your ads. You will receive payment for each click.

Some ads pay better than others. Some pay as little as 1 cent and some rare examples can pay as much as $75.00 per click(no lie).

Its been my experience that the average ad pays somewhere between $.40 & $.80. It depends on the content. Overstock may only be willing to pay 4 cents for clicks, while a trial lawyer maybe willing to pay $20 for an ad that attracts clients in to sign up for a great big lawsuit or something. Some consulting companies will pay about $1 or so . It just depends on the market rates.

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