Gmail is free, YouTube is free, Blogger is free, so why is Google Inc. worth 200 billion dollars?
A good chunk of that is from advertising.
Google completely changed the face of internet advertising a few years back with AdSense and AdWords. I’m going to give a very brief overview on what they are, talk about how we use them, and point out a few pitfalls to watch out for.
AdSense is a dream.
Before AdSense, if you had a website with good traffic and you wanted to sell advertising on your site, you became the internet’s equivalent of a door to door salesman. You went around to a bunch of other websites and told them that for x amount of dollars per month, you would put their banner ad on your site. The method was crude, and cheating was rampant.
With AdSense, it’s a thing of the past.
If you have a website, you can sign up for AdSense 100% free, and pick what size and shape ads you would like to show on your site (you can show up to three ad units per page). Google gives you a tiny piece of code which you need to copy and paste onto your webpage where you want the ad, and within an hour or two you are up and running with ads showing on your site.
Google does EVERYTHING for you.
It analyzes your site’s content, picks what it thinks are the best ad’s for your visitors, and starts displaying them. If people click on the ads, you get a small kickback. How much? We’ve gotten MANY clicks for one cent and I think the highest we ever got for a click was $2. While Google has never released the figure, the industry consensus is that you get about 70% of what Google charged for the ad.
Google claims that it is constantly running algorithms to figure out which ads will make you the most money. It makes sense that they would, since the more you make – the more they make.
Where do the ads come from? I’m glad you asked!
AdWords is the other half of Google’s advertising model.
If you have a web page you want people to visit, and you’re willing to pay for traffic – AdWords is one option.
AdWords ads can manifest themselves either as the sponsored top items listed in Google search results (the ones with the light colored background) or as ad’s displayed on sites where the owners have implemented AdSense.
If you ever heard the term “organic” related to searches or SEO and wondered what it meant, it means FREE. Organic SEO means that you’re kicking it “old school” – building back links, and so on.
AdWords is usually referred to as PPC or “pay per click”. If someone clicks on your PPC ad, you pay whatever you agreed to pay per click.
There is also something called PPM, which means you pay per thousand impressions of your ad regardless of how many times it was actually clicked. PPC is much more commonly used than PPM.
What does it cost per click? That depends on what keywords you want your ad to appear for. If you’re trying to get your ad the top slot for “Wichita Falls pumpkins” you can probably get that for a penny or two a click. I’ve heard PPC for Phoenix area DUI lawyers has gone for around $50 a click!!
Just a slight difference huh?? For businesses it boils down to simple math:
- If I make widgets which I sell for $20 and make $11 profit per widget.
- I track the visits to my site and my conversion rate and so I know that 20% of the people who visit my site buy a widget.
- If this is the case, then as long as I pay less then $2 per click, I should profit overall.
- If I pay $3 per click and still only convert 20%, then I lose $4 per widget sale (since my 5 visits cost me $15 instead of $10).
This math is exactly why business pay huge money to track EVERYTHING related to people visiting their site, and it’s also why we have never used AdWords. Right now every book we have is free so it really doesn’t make sense for us to pay to send people to Lizzy’s site.
We’re taking the opposite method and trying to push our free books out to everyone, so that we can build a fan base. That is most certainly not the approach for everyone, but it’s what we’re trying, and sharing our results with other authors so that they can make more informed decisions for themselves.
In the interest of trying new things so I can give my thoughts, I’ve signed up for $80 worth of free AdWords credit. I’m not counting on it to bring a high volume of traffic to the site, but it will be interesting to see what I have to end up paying per click. In a few weeks I’ll report my findings.
Should you use AdWords?
That’s a highly personal decision and one that’s 100% up to you. If I was going to use it, I would do the math to figure out what each click was worth to me, and I would make sure I SET A DAILY BUDGET!!!!!!! There is an option in Google to set a daily budget but it is not on by default.
I have heard many horror stories of people setting up AdWords, going to bed and waking up with a bill in the hundreds. If you decide to tinker around with it, be careful and read thoroughly.
We do use AdSense.
We haven’t made much at all from it, but that’s largely because we only have one small ad in the upper left corner, and because a lot of our traffic only passes through here en route to download on of our books. I’ll talk about some AdSense best practices in a post later this week.
As always, feel free to post any comments or ask any questions!