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Welcome back to the second part of our series designed to help you better understand revenue fluctuations. If you’re just joining us now, or if you’d just like to brush up on those reporting terms before we dive in again, feel free to visit our previous post from earlier in the week.

Choose the right treatment

You’re finished investigating the cause of the revenue fluctuations, and it’s time to take action. Find the symptom you identified below for suggested treatments.

Page impression changes

• Check for AdSense technical issues or public service ads (PSAs). If ads aren’t being served on your site, we aren’t registering page impressions.
• Don’t miss out on search traffic. Use Webmaster Tools to make sure that Google is properly crawling and indexing your site.
• Consider the promotions you have running for your site. Did an ad campaign end, causing a drop in traffic? Has a popular site linked to you, causing a spike in page impressions?

CTR changes

• A drop in CTR can be caused by a user interface (UI) that’s not optimized or by poor targeting. Readers won’t click on ads they don’t see or find irrelevant. To improve the relevance of your ads, you might want to try section targeting.
• Check for crawl problems. If our system can’t crawl your page, we can’t serve relevant ads.
• If you’ve implemented or changed your ad server, check that there are no new targeting problems.
• Have you changed the look and feel of your site? Follow our optimization best practices whenever launching a site redesign. An easy way to start is to match the ad colors to the design of your site and choose a top performing unit such as the 300×250 medium rectangle.
• If your CTR has been in a slow decline, your readers may be experiencing ad blindness. Try testing new ad formats, placements, or colors.

CPC changes

• CPCs are determined by advertiser bids and are not directly under publisher control. Most large CPC changes are seasonal. For example, certain ad verticals attract more spending during the holiday or back-to-school seasons.
• CPCs can also fluctuate as advertisers begin and end their advertising campaigns.
• You can always improve your CPCs by choosing ad formats that support all ad types: text, image, video, flash, and gadget ads. More competition means higher advertiser bids.

Placement targeting revenue changes

• If overall targeted revenue is changing, determine what your average placement-targeted revenue has been for the past few months. Your goal is to determine if the changes in your recent earnings are part of a trend or a short-term earnings fluctuation.

  

• Publishers can experience spikes in placement-targeted revenue when advertisers run limited-time campaigns. For example, an advertiser may run a large placement-targeted campaign only during the opening week of a summer blockbuster movie.
• If you want to increase placement targeting over the long term, set up ad placements. This will make it easier for advertisers to find and target your site.

Finally, two more things…

Where are the changes happening?

Many AdSense publishers run multiple websites or have site sections that perform very differently. For example, the article section of a cell phone review site may have a higher eCPM than the forums. Whenever you notice revenue changes at the account level, always determine which of your sites or sections is causing the change. You can set up URL and custom channels to track all the important parts of your account separately. Knowing exactly what is changing and where will allow you to make the smartest decisions about what to do.

Taking seasonal fluctuation into account

Take a broader view and look for historical fluctuations in the metrics described above. Over the same time period last month or last year, you may find similar volatility in your eCPM, revenue, or page impressions. For example, you can compare the Mother’s Day performance of a flowers and gifts site for 2006 and 2007. Is your current account performance consistent with the previous time range? If so, the revenue change you’re investigating might reflect a recurring pattern.

I hope this series will help you get the most out of AdSense, and the next time your revenue changes, I hope it’s for the positive.

Posted by Christian Ashlock - AdSense Optimization Team

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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 up

The 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 / 1000

eCPM = Revenue / Page Impressions * 1000

The 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 CPC

Once 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 symptoms

Now 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 discussing ways to treat revenue fluctuations based on the symptoms you’ve discovered.

Read Part II

Updated to fix typos

Posted by Christian Ashlock - AdSense Optimization Team

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When Les Kenny and his family launched their do-it-yourself (D.I.Y.) website www.buildeazy.com in 2001 solely as a hobby site, they had no idea of the impact Google AdSense would have on their lives.

Les had spent most of his life building in both Sydney and Auckland, but his hobby was designing projects and writing about them. This inevitably led to the Buildeazy website, where he posts D.I.Y. woodworking and building projects. He caters to a universal audience by using general terminology and incorporating both metric (mm) and imperial (ft and inch) measurements into all his projects. Les and daughter Roseanne also wrote two successful kids D.I.Y. books published in Australasia. They had intended to write more books, but AdSense proved to be more lucrative.

In early 2004, Les incorporated AdSense into his website. Around March 2005, to his amazement, optimisation of the AdSense ad units throughout the site doubled the earnings overnight. The income from AdSense allowed both Les and his wife Jenny to give up their day jobs and work solely on their passions and hobbies. It has also allowed all of the family to get involved.

Les has spent a lot of time experimenting with his ad layout and colour, making use of the Manage Ads feature and custom channels. He found that the 300×250 medium rectangle was overwhelmingly the best performing. Using custom channels, he was also able to remove some units which weren’t performing as strongly to reduce clutter on his site.

“Most of my pages now consist of only two ad units -a 300×250 medium rectangle at the top of the page and a 336×280 large rectangle at the bottom of the page. I have found that a couple of well placed ads on a page do better than a cluster of ads all over the page - and I guess it is also more pleasing for the visitors.”

Once the AdSense units are placed and optimised, everything takes care of itself — leaving Les and family to get on with what they enjoy most.

Posted by Tim Egan - AdSense Australia Optimisation Team

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