Monday, January 15, 2007

Why You Shouldn't Start a Business Based on AdSense

Not long ago, I talked about my great success adding AdSense to my used car site. For a while, it was great, the more clicks I got, the more money I made. Unfortunately, starting around September, the relationship between money earned, and ads clicked started to differ wildly.

I made a graph of what's going on (click to see larger):

The red line represents the click trends, which follow the general traffic trends of our site, which is basically a nice Sin curve following the times of year when people shop for cars.

The blue line is what Google is paying per 1000 clicks (it's on a different scale then the other line, scales not shown).

The interesting thing is how it started out with a very close coorelation, but over time has gotten eratic, and now it's simply divergent (The more clicks I'm getting, the less Google is paying??). Assuming all sites in my same category are getting more clicks over all, shouldn't that increase the price for ads? It's sketchy how Google keeps the actual breakdown of price paid per click secret. They can essentially "take profits" as the middle man any time they want, with no way of us auditing. It's their right to do this, but this is why I think it's silly to base a new company on AdSense as I see some doing. How can you possibly anticipate profits when there is no relation to the amount of clicks and the price paid? (The content doesn't really change on my site).

If there is no profit taking going on, is the market for AdWords slowing or drying? It seems like from the point of view of someone paying for AdWords, Google has only increased costs. Maybe I am missing some more obvious explanation for the results above.


At 3:18 AM, Anonymous Anonymous said...

Last summer I put AdSense on my article pages. I had top, sidebar and bottom ads. My traffic has tripled since then, my clicks have increased (but not tripled), and yet my earnings are lower.

So, I decided to remove AdSense, but I wanted to hit the next $100 threshold to get my final payout first. So, I left just one banner per page.

My eCPM has gone up dramatically.

I think what was happening was that too many ads per page caused the low-ball bidder ads to dilute the average click value. By limiting the banners to just one, the higher bid ads are shown more, thus increasing the payout when some one does.

So, you might try removing one of the banners on your pages and see what happens.

At 11:37 AM, Blogger James said...

I'll give that a try, thanks for the suggestion nick.


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