Why AdSense Earnings Are Falling Down
Most publishers have complained about an accentuated drop in Adsense revenues, which has led them to begin a desperate search for alternative traffic monetization systems (affiliates, link building circuits, pay per action, etc.).
Actually, whoever invests on online advertising, especially on pay-per-click programs such as Adwords, knows pretty well that this drop might be connected to the world economical crisis and understands the reasons why the clicks have paid less and less (not considering willingly other factors as smartpricing).
Photo Credit: Domen Colja
How cost-per-click is built
Advertisers using Adwords to promote their products/services in the Adsense circuit must, first, choose relevant keywords for the kind of ad they wish to be visualized. Those keys (simple words or phrases) are used to show Google the kind of website and post the advertiser wants theirs ads to be displayed on.
The next step is to insert in each key a certain cost to be paid for each click received on the ads linking to their services. As each Adsense block receives around 5 ads, what will happen if 1000 advertisers are willing to display their ads using the key-word? It’s simple: Adsense will prefer those who pay more per click.
In fact, for each key-word there’s a real auction in which who bids the highest will have more guarantees of seeing their ads displayed on websites and on more quality pages (which guarantees a higher ROI).
For the most popular and requested key-words, Adsense imposes a real limit, that is, a minimum value to be offered for only one click it won’t guarantee the ad to be shown if this value is lower.
In the image above, I offered one cent to have an ad displayed on a relevant page linking to a specific key-word, and further to the left, Adwords tells me that there’s no negotiation for less than 4 cents.
What’s the impact of advertisers competition on pay-per-click
It’s obvious: the higher the number of advertisers wanting to have their ads linked to one specific key-word, the higher the price of the cost-per-click, just like in a real auction, and the higher the minimum cost-per-click value demanded from advertisers will be in order to get into the competition.
The value of a single click depends by the number of advertisers that bid at specific keywords (actually, there are other factors but I don’t want to complicate the things too much)
Check how much a simple click on a loans and financing ad is worth:
As you can see, the economical crisis has caused an increase of CPC on this kind of ad. To create this kind of report, use the KeywordToolExternal.
Drop on click costs
In times of economical crisis, there’s less money around to invest, therefore, budgets destined to advertising campaigns are cut down. Check the influence on the cost obtained per each click:
- the number of companies investing on online advertising drops and that reduces other companies’s budgets
- the number of competitors disputing for an ad to be displayed for a certain key-word drops as well
- less bids on key-words mean less minimum bids, and maximum as well, consequently
- online publishers (like you) are in for a drastic reduction on the average click revenue standing before an unchanged click through rate, or even a higher one sometimes.
In other words, it is like having a short audience auction: you can buy the object in question for a much lower price than the usual, what will make the seller (you) receive a lot less.
Some advice
The best thing to do is not to worry too much. In a year’s time, a lot of factors can be chained to determine the increase or fall of online revenues.
It is advisable to strictly evaluate your costs on a yearly basis, otherwise, you’ll take the risk of making choices based on the heat of the moment which, besides not being helpful, can cause things to get worse if there are changes in the mechanisms unrelated to revenue drops.
Related Posts
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- Affiliate Programs: How To Get The Most Out Of Pay Per Action Ads
- Top 5 Affiliate Programs Comparison
- Problogging: How To Write Post That Attract Traffic For a Long Time
by Dan Di Gregorio | 13 July 2009 | Featured, Problogging
Tags | adsense, advertising, blog, earning, pay per click
Your content is very interesting, bookmarked
regards khhudf
I just wanted to say that I think this post is a bit limp… Its not just economic downturn and it won’t get better.. Its an aggressive approach to smart pricing which is becoming more intense and capping profits.. It isn’t just a case of waiting for things to improve, its a case of improving your site, its content and its popularity.. If it were just the economy the adwords bid averages would have shifted massively downwards in recent months but they haven’t.. Its just the standards for good content are getting higher..
Hi Mark, thanks for sharing your point of view.
Yes, smartpricing is strictly connected with the quality of the content and the popularity of a blog but the Pay per Cost of each click can increase and decrease drastically due to others reasons.
The most important one is the bid level on the specific keyword. If few advertisers are bidding on a specific keywords we can improve our blog and our content how much we can: the CPC will remain low.
So, in times of economical crisis the advertisers decrease their budgets and the bids are obviously low.
Ciao!
Dan
I really liked your thread about this, and I’ve seen a few more like it recently – the best part about yours is, it’s very informative and useful and full of good information without a bunch of usless rants and BS!
I’ll be sure to give this URL to some friends
Thanks Again
Hi, I tried to reach you last week, but I couldn’t.
Adsense earnings are definitely down, and I think it is because of the recession.Better look for additional income streams.