Google AdSense:

Google allows webmasters to publish context relevant Pay-per-Click ads from the Google AdWords system on their websites and generate revenue if a visitor clicks on one of the ads. Since it’s inception by Google in 2004 AdSense has become one of the most popular ways for website owners to generate income on the Internet.

It is based on a sophisticated system of Google evaluating the site’s content along it’s keyword s and meta tags and then sending ads which are relevant to this content. If a visitor to this site clicks on an AdSense ad the advertiser has to pay Google and Google passes a part along to the site owner.

Example of a Website with massive Google AdSense on it (www.hdtvplace.com ). Note that the site’s subject is HDTV and that all the AdSense ads have to do with HDTV services or equipment.

Webmasters can sign up for an AdSense account with Google and if approved, are supplied with a code which has to be included into the sites source code. This code makes relevant ads appear whenever the site is called up by a visitor.

The webmaster can exclude ads of his direct competitors to be published on his site. Otherwise there is no direct possibility to control which ads are to be seen. This can only be done indirectly by optimising the site for specific keywords so the system won’t have any doubts as to what the website is about and what ads to send.

Earnings for webmasters depend on the following factors:

• Most important, of course, is the amount of traffic to the AdSense pages. The more traffic, the more clicks, the more earnings.

• The cost per click (CPC). This is the price advertisers have to pay Google when a user clicks on their ad related to specific keywords. It mainly depends on the competitiveness of the keyword, i.e. how many advertisers are bidding for it. Google doesn’t publish the percentage passed along to the webmaster on who’s website the ad was published. Estimations are 35 to 55%. I.e. if a visitor clicks on an ad with a CPC of $1 the webmaster’s earning is between 35 and 55ct per click. It follows that building a website around higher paying keywords will generate more revenue.
  Note that in 2006 there was a change in Google’s AdSense policies called Smart Pricing which is massively affecting this point. See under this definition for more info.

• The positioning of the ads. That is where they are placed on the site and in relation to the content

• The ad layout - headline and link  colour, font, size, background etc. The screenshot shows that one is not limited to the standard Google AdWords layout with blue headlines and green links but one can vary the layout to seamlessly blend into the general page layout. Experience shows that the highest click rates are achieved when an ad is not to be recognized as an ad on the first glance but rather seems to be part of the page content . While AdSense policies generally forbid any kind of prompting a visitor to click on AdSense ads or directing a visitor’s attention to them by means of graphics or content (like arrows pointing to the ads, “click here” buttons etc.) adjusting ad layouts to blend in is a legitimate means to increase click rates.

Tweaking around these factors can dramatically improve click-through-rates (CTR) and earnings.

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