In the late 90s, web publishers were riding high with banner ads. Payouts were great, and many web owners actually saw their dream of sitting on a beach sipping tequila nearly realized.
Alas, the glory did not last.
The bubble eventually burst. Cost per thousand impressions (CPM), the price barometer of banner advertising, dramatically fell. Whereas some web owners were enjoying CPM rates of as much as $150/CPM, the rates soon fell to as low as $0.50/CPM. For that given rate, sites generating 500,000 monthly impressions first saw their banner advertising revenues reach to about $75,000/month only to find it fall to a mere $250/month. That is one major ouch! To date, rates for banner advertising has been slowly increasing, but has not (and may never return) to the late 90s level.
Now, there’s a new thing in town that has the web community, particularly the small business web site operators, buzzing with excitement. It’s called contextual advertising, and programs include Google Adsense, Quigo’s Adsonar, Overture’s ContentMatch, IndustryBrain, among others (for a discussion of the programs, read “Earning Revenues from Contextual Advertising”).
Contextual ads are delivered based on the content of the web page using an automated system. Contextual advertising serves up ads that are targeted on the contents of a particular page, e.g. an article on how to get a bank loan will serve up bank loans or personal loan ads. These ads are often text based but some programs like Google Adsense offers image-based ads; and many programs are cost-per-click based but preferred publishers (often those generating tremendous amount of impressions) are paid on a CPM-basis.
The promise of contextual ads is that its improved targeting capabilities are deemed more effective than other types of online advertisements (e.g. banner) and hence more likely to be clicked by a user. As a result, publishers are given the chance to earn more from their web real estate.
However, contextual advertising is not just a simple matter of applying and putting up the codes on your website and wait for the checks. There are a number of ways to maximize your earnings from contextual advertising, whether you are running Adsense or Adsonar or anything in between. Here are a few of them:
The first rule of thumb of contextual advertising is that it is not for everyone. Some sites do extremely well with it, earning 5-figures or more a month, while others earn mere pennies a month. Others running Google Adsense, for example, enjoy being in the “UPS Club” (Google sends by UPS the checks to publishers who earned $10,000 or more whereas the rest gets their check through regular mail). Many say that they find it hard to even reach the monthly check cut-off amount of $100.
The beauty about contextual advertising is that it is not about traffic, as there are some sites getting only 5,000 ad impressions that earn more than those getting 50,000 impressions monthly. It is about the types of visitors you have. So what types of site do well with contextual advertising?
Sites where users are in a buying mood
Sites where users are looking for information on specific products or services that interest them – product, business opportunity, looking to buy tickets, etc.
Sites where users are researching ways to spend money
Sites with a high percentage of fresh unique visitors (regular visitors tend to ignore ads)
Sites where users show an interest to ads, and not just the site’s offerings
If contextual advertising is not working for you as you expect, be sure to check out other forms to monetize your web real estate such as affiliate programs and CPM-based advertising.
2. Develop solid content for your users.
The key to a successful foray into contextual advertising is content. Content is what brings visitors to your site, and content is what makes them interested in the ad. Content is also what the technology will read to serve well-targeted ads. The more quality content you have, the greater your propensity to earn from contextual advertising.
Looking at it from the advertisers’ perspective (the group of people who are actually paying the publishers), many prefer their ads to be shown on sites with good content. One of the common reasons why advertisers turn off the content network option for their ads (in addition to showing their ads in the search engine results, such as in Google) is that they do not want their ads to be shown in spammy or no-content sites. Why? Because they feel that poor quality sites may give them clicks, but not useful leads. A user may have clicked on their ads – not because of any interest in their advertised products or services – but because they want to exit the site as soon as possible and the only way out are the ads. Advertisers do not just want clicks: they are paying to get visitors interested in what they have to offer. They want visitors that they can convert, whether conversion is defined as a sale, signup to a newsletter, or an inquiry.
3. Read and follow the Terms of Service carefully.
The Terms of Service spells out the do’s and don’ts that will guide you in your program participation. It will tell you how you can place the ad codes, where you can place them, among others. More importantly, it gives you the reasons why you can be terminated from the program – from generating fraudulent clicks to showing competing adverts. Yet many publishers do not even bother to read what these terms are – and then complain that they were kicked out from the program because of a violation.
It is imperative to carefully read and understand a program’s Terms of Service (not just contextual advertising, in fact). You don’t want to lose a revenue source that may be giving you as much as $5,000 a month just because you did not read the Terms that you have supposedly agreed! Some programs such as Google Adsense are strict with regards to terms compliance, and often sends either a warning email to rectify your mistake, or an outright termination notice giving you a few hours to remove the code from your site.
4. Use and analyze available data.
As a participant in a contextual advertising program, you will be provided with reports that tell you how effective the program is working on your site. The basic metrics will include page/ad impressions, number of clicks, click-through rate (CTR) and earnings. Some provide effective CPM, or the cost per thousand impressions. These metrics can help you analyze what is working well in your site, and whether you can improve your revenues.
For example, if your CTR is only 0.2 percent and you stumbled across a posting of a competitor in your niche bragging that their CTR is 4.5 percent, then you know that your content can handle such a high CTR rate. Then you develop strategies to improve your CTR.
You can also use your effective CPM data to compare across your various revenue sources. The effective CPM is calculated by dividing total earnings by the number of impressions in thousands (e.g. if a publisher earned $200 from 50,000 impressions, the CPM would equal $200/50, or $4.00). Your effective CPM can show you how much your site is worth in terms of advertising, and it can be your benchmark when you sell your own banner ads. You can also choose to select and actively promote in your site affiliate programs that have effective CPMs that either equal or exceed the rate you are getting from contextual advertising networks.
Many also look at their earnings per click (EPC), derived by dividing revenues over the number of clicks (if revenue is $200 from 600 clicks, then EPC is $0.33). Since the value of actual clicks from specific keywords are not known, this average number is an indication of the “value” of the keywords covered by the website.
Google Adsense has a particularly useful data that can help you analyze the performance of key segments of your site – the channels. While reporting is delayed by a couple of days, you can set up different content, topics or ad format as different channels. Google allows as much as 50 channels. If you have 5 sites running Adsense, for example, you can set-up each site as a different channel so you can get information as to which site actually brings in the revenues. Or you can set up your channels based on different topics on your site to see which topics offer the highest effective CPMs and those that generate the best click-throughs. Another way to use the channels is to set it up to determine the effectiveness of your ad formats — whether the leaderboard ads at the top-of-the-fold gets better click-throughs and revenues compared to rectangles at the bottom of the page.
5. Experiment, experiment and experiment.
There are three things that you can work on to increase your revenues: the number of ad impressions, number of clicks, and your click-through rate. Even if your traffic is not growing as fast as you hope for, you can grow your revenues if you improve your click-through rate. And you can improve the performance of the contextual ads in your site by experimenting on layout, colors, ad format, and number of ads.
There are no hard-and-fast rules as to the most effective layout and ad formats: it will depend on how your site is set-up and the contents of your site. A large rectangle, for example, may increase the CTR of a site that commonly uses long articles. Another site may find that a leaderboard or a skyscraper may augur well for them. In terms of colors, some sites report that their CTR doubled or tripled when they blended the ads with the color of their site, while others believe that using contrasting colors in the ad block increases the click-through rates.
You need to experiment and see what works best for your site. Track how changing a regular banner to a skyscraper affected your revenues. If the revenue increases, then stick with it. If not, try something else. Remember, though, that what works for one web site may not necessarily work for the other web site.
6. Increase visibility of your site.
Increasing your traffic and continuously building your website is always a good way to improve revenues, not just contextual advertising. Contextual advertising is a “set and forget” solution that works especially well for small online publishers, because it allows the publisher to focus on building content instead of trying to sell ads.
7. Diversify keywords.
The number of advertisers who are bidding on the keywords, and the amount they are bidding affects earnings from contextual advertising. When there is a bidding frenzy for your keywords, you may find your earnings to increase. However, if the biggest advertiser pulls out from the content network or stops their ads for whatever reason, you may find your earnings go down the drain. One of the realities of contextual advertising is the seesaw motion of earnings: today you may be earning well only to find your earnings go down the following week.
To protect your revenues from wild fluctuations, the best approach would be to diversify your keywords by developing content based on different topics. The price of a click for one keyword may decrease, but you still have other competitive keywords where advertisers are placing big bids.
8. Enjoy while it lasts.
For those who have found gold in contextual advertising (or at least sizeable revenues), their fervent wish is for these types of programs to proliferate and continue – and their incomes continue to increase. Alas, nothing lasts forever and the Internet has shown that things can go downhill pretty quickly. There are a number of things that can affect and reduce publishers’ earnings:
Reduction of payout. Google and other providers reduce their payout to the publishers, as what happened to banner ad networks (when things got tough, publishers getting 70-30 share before were reduced to 40-60 in some instances). A reduction in payout can immediately shrink the publisher’s income.
Text ad blindness. Just as users have learned to ignore banner ads, they can also be conditioned to ignore text ads, no matter how targeted.
Discounted clicks. To lure more advertisers into the content network programs, providers often provide enticement such as discounted price per clicks. Google for example has introduced in April 2004 “smart pricing” whereby the price of the clicks are adjusted based on potential conversion. Publishers whose sites generate numerous clicks for an ad may be paid on a decreasing scale, thus also cutting the potential income of publishers.
The programs can be terminated. The provider may decide to get out of the contextual advertising game and focus on other business models. Or they may restructure their program in its entirety that may not be advantageous to the publishers.
The key is the old adage: “Do not put all your eggs in one basket.” You must always have a diversified source of revenues, and not rely on one income source. Combine contextual advertising with affiliate programs, other types of advertising (as long as they don’t conflict with the terms of the other programs), or other business models. This way, you will not be left empty-handed when contextual advertising dries up.
Nach Maravilla is the President/CEO of PowerHomeBiz.com. For information on starting a small or home-based business, visit PowerHomeBiz.com at http://www.powerhomebiz.com
