Thursday, January 7, 2010

Is there money to be made with Google Adsense?

Websites, can they make you money?

I have had numerous people ask me this question over the past few months, so I figured I would address it.

Websites have a very low payout from what I've found over the past few years.
So how much can you expect to make from a website?

I can't give specifics on the exact details per terms of the Google AdSense agreement, so I will use some hypothetical numbers based off of what I have experience in the past and from what other website owners I have found discussing. There are three things that directly affect revenue from a website Click Thru Rate (CTR), Cost Per Click (CPC) and traffic.

Average Click Payout For An Ad (CPC)
The average click on most keywords are low. Anywhere from pennies to 50 cents a click. Rarely will they go over this unless you are so focused as a niche and the keyword is competitive thus driving the bid up for advertisers. However being focused on work will probably lower your traffic thus limiting the amount of clicks you are going to get. So even if they pay more, you'll have less clicks and less revenue.

Click Thru Rate (CTR)
Look, nobody can tell you what percentage of your users are going to click out. There are so many variables that can contribute to this. Location of ads, colors of ads, content on your website and whether it generates relevant ads, number of links on your page (the less links the better chance of a click due to limited options for the user).

I'm assuming that you're not just in this for the money and also want to actually have a meaningful website. In this case if you optimize your ad placement (see this in earlier AdSense Makeover for ideas), you can expect anywhere from 1% to 10% CTR. Yes, that's a big spread, but that just shows the difficulty in having someone try to tell you what your CTR will be without knowing what your website looks like.

Traffic is the key, With no traffic you have no revenue. Traffic on websites can rank from the very high, receiving hundred of thousands of unique visitors a day, to a small website that may get 50 hits a day or fewer.

I'll make this very clear now, your traffic numbers when it relates to revenue comes down to unique views. Total page views really mean nothing. Page views simply show if your content is interesting enough or whether you have a following of regular users who go through more than one page. Multiple page views have nothing to do with revenue because you usually can only receive one Click Thru per unique user (occasionally you'll receive two or more, but it is rare and not considered here).

Example Revenue From A Website
So, we have some vague variables.2-50 cents a CPC, 1-10% CTR and traffic.

When working with Google AdSense it's important to remember that you will only get paid when you accumulate more than $100 in a month. So if you make less than that you will not receive a check until your total accumulated revenue clears $100 total.

Here are a few examples of revenue you can expect from a website. (All numbers are hypothetical and months are based on 30 days)

Example 1
Average CPC: .20
Average CTR: 2%
Traffic: 1,000 unique hits a day.

1,000 * .02 = 20 clicks a day
20 * .20 = $4 a day or $120 a month

Example 2
Average CPC: .25
Average CTR: 4%
Traffic: 100 unique hits a day.

100 * .04 = 4 clicks a day
4 * .25 = $1 a day or $30 a month

Example 3
Average CPC: .30
Average CTR: 2%
Traffic: 2,500 unique hits a day.

2,500 * .02 = 50 clicks a day
50 * .30 = $15 a day or $450 a month

Example 4
Average CPC: .20
Average CTR: 5%
Traffic: 5,000 unique hits a day.

5,000 * .05 = 250 clicks a day
250 * .20 = $50 a day or $1500 a month

Example 5
Average CPC: .05
Average CTR: 3%
Traffic: 5,000 unique hits a day.

5,000 * .03 = 150 clicks a day
150 * .05 = $7.50 a day or $225 a month

As you see in example 4 and 5 above, you can have the same amount of traffic and have a totally different revenue simply based on your CTR and CPC.

Writing Good Content Isn't Enough
Generating good content is great, but if you have tried to monetize your website and failed repeatedly it's time to do some research. You can't just slap some ads randomly on your website and then say "advertising doesn't work".

The most common mistake is putting 1 small ad on the right navbar of your website, below the fold where people have to scroll down two pages, leaving it the default colors and then wondering why nobody is clicking on it.

Do some research and testing.

Final Analysis
So there you have it. It becomes obviously apparent that traffic, while a necessity, is not the only thing you need to make revenue. While you can work on increasing traffic and your CTR, there's not a whole lot you can do about the CPC unless advertisers start bidding more for your topic or your content changes enough to cause the showing of higher paying ads.

You can make a living -- or at least supplement your living or pay your website associated expenses -- off of a website, but with certain subjects generating such a low payout you'll have to work at it.