Date: Wed, Mar 5 2008 3:25 pm
From: Inside AdSense Team
You love your website and you want it to thrive. You create content,
manage your community, and keep an eye on your AdSense performance. If
AdSense revenue is down, you're understandably concerned. If AdSense
revenue is up, you're happy, but you want to know why. Revenue
fluctuations are obvious enough when they occur, but the root cause
isn't equally clear. It can be challenging for both new and experienced
publishers alike to analyze their AdSense data and respond effectively
to changes.The goal of this post, and our follow-up later this week, is
to help you understand the AdSense revenue model so you can diagnose
and treat revenue fluctuations like an experienced MD.Study upThe first
step is knowing how the figures reported in your account (such as eCPM,
CTR, and page impressions) interact to describe your total revenue.
Think of each number as a variable in the revenue formula for your
site. At the highest level, you can calculate revenue by multiplying
your page impressions by the effective cost-per-thousand impressions
(eCPM) and dividing by 1000.Revenue = Page Impressions * eCPM /
1000eCPM = Revenue / Page Impressions * 1000The eCPM metric provides an
estimate of how much revenue you can expect to earn for every 1000 page
impressions. For example, if you serve 10,000 page impressions and earn
$40, your eCPM is $4. If page impressions increase to 30,000, you can
predict that you'll earn $120 given the $4 eCPM.Most AdSense ads pay on
a cost-per-click (CPC) basis, so eCPM is really a measure of your
average ad performance. Breaking eCPM into the click-through-rate (CTR)
and the average cost that advertisers pay per click (CPC) gives you a
more accurate measure of performance.Revenue = Page Impressions * CTR *
average CPCOnce you know your average CTR and your average CPC, you can
predict how much revenue you'll earn for a given amount of page views.
You can also analyze your revenue by looking at placement-targeted ads
versus contextually-targeted ads.Total Revenue = Revenue (contextual) +
Revenue (placement-targeted)While contextually targeted ads always pay
per click, advertisers can pay for placement-targeted ads by impression
(CPM) or by click (CPC). To account for both of these bid types, you
should look at the average eCPM for placement-targeted ads. More
simply, you can just add placement-targeted revenue to your
contextually targeted revenue.Revenue = (Page Impressions
(contextual) * CTR * average CPC) + (Page Impressions
(placement-targeted) * eCPM (placement targeted) / 1000)Revenue = (Page
Impressions (contextual) * CTR * average CPC ) + Revenue
(placement-targeted)Even though we're looking at contextual and
placement-targeted revenue separately, don't forget that these two
types of ads compete against each other in the auction. We'll always
show the best performing ad, regardless of targeting type, so more
competition creates higher winning bids.Identify the symptomsNow you're
ready to diagnose any revenue fluctuation. Just like the revenue
formulas above, let's start simple and gradually get more complex.The
first question to ask is: Did either your page impressions or your eCPM
change? You can compare trends in both page impressions and eCPM using
the Advanced Reports in your account.If your AdSense page impressions
have declined, you should determine if traffic to your entire site is
declining as well. A web analytics tool such as Google Analytics can
provide you with this information. In addition, you should check your
pages for unpaid public service ads (PSAs).If your eCPM is down, you'll
need to dig one level deeper and find out if your contextual or
placement targeted ad performance has dropped. You can also find this
data in the Advanced Reports tab using the options shown below.Let's
consider your contextual ads first. The two key metrics to investigate
are CTR and average CPC. CTR is given in your reports, but you'll need
to calculate your average CPC using your favorite spreadsheet. (My
favorite goes without saying). Please keep in mind that this is still
an average CPC for your account and doesn't necessarily correspond with
the price paid by any specific advertiser. Once you've narrowed the
change to CTR or average CPC you're ready to start treatment.For
placement-targeted ads, you should analyze how much total
placement-targeted revenue you are receiving and the average eCPM.
Changes in either of these metrics usually indicate that advertisers
are beginning or ending campaigns targeted to your site. Again,
placement-targeted campaigns are more likely to be short-term than
contextual campaigns.That's all we have time for today -- now that you
have a better understanding of what factors can affect revenue, don't
forget to check back later this week for the second part of this
series. We'll be treating ways to treat revenue fluctuations based on
the symptoms you've discovered.Posted by Christian Ashlock - AdSense
Optimization Team
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Posted By Inside AdSense Team to Inside AdSense at 3/05/2008 03:25:00 PM
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