AdSense Makes Much More Sense

In search engine marketing (SEM), you can’t sit still. Last month’s killer strategy might be this month’s losing strategy. That’s one reason I advocate constant campaign testing, with some variables tested in real time. You never know what changes in the SEM landscape will require you to rethink current strategies.

A major recent change occurred on the AdSense side of Google’s AdWords pay-per-click (PPC) network. We tested AdSense for clients over a year ago. Throughout the beta period and thereafter, we tested the effectiveness of the content side of Google’s network for every client. If conversion (or click quality) was sufficiently lower for contextual ads than search ads, we advised clients to opt out of the contextual ad network.

There was enough difference in click quality (measured by conversion) to result in an opt-out decision, particularly for e-commerce clients. When a marketer decides to opt out of AdSense, it’s unfortunate for everyone involved. Marketers generally want as much quality traffic volume as possible at the right price. Search engines and publishers in the network want to sell ads and generate revenue. Even consumers like to see relevant ads.

Google strives for improvement and considers the programming code for its products to be in constant flux — almost works in progress. So, it didn’t surprise me AdSense’s targeting ability would get better over time. What did surprise me is how much better AdSense conversions have become over the last month or so.

Two factors determine whether AdSense works for a marketer: conversion from click to action (sales, registrations, etc.), which is expressed as a percentage, and the cost of the click. One factor can compensate for the other. Low conversion isn’t as great a concern if the CPC is low enough.

Several weeks ago, Google announced a change in the AdSense program. “Smart pricing” was developed because Google knows not all traffic is equally valuable. Under the new model, lower CPCs are charged for pages and sites that generate lower traffic quality than others in the program, as determined by Google’s technology. AdSense publishers who deliver lower-quality clicks earn lower revenues, appropriate to traffic quality. Of course, publishers with high-quality clicks continue to have higher revenues. If it works, it’s fair for everyone.

When Smart pricing came out, an opportunity arose for all marketers to retest contextual traffic with new pricing. After all, if contextual traffic was billed at a lower average CPC thanks to Smart pricing, campaigns that failed to perform in the past could suddenly hit return on investment (ROI) targets. So, we cautiously turned AdSense back on for some clients who wanted more search volume.

Not only were the CPCs charged for contextual traffic lower than before, but conversion rates improved as well. In some cases, they improved dramatically, putting quality contextual clicks for some campaigns on par with pure search, even on a percentage conversion basis. When lower CTRs were factored in, some campaigns even began to have a higher ROI for contextual ad than for pure search.

The system appears to be working. If contextual ad targeting improves and Smart pricing works by discounting some clicks when appropriate, content campaigns would deliver ROI at the same level as pure search. Occasionally, they’d even outperform pure search due to the data’s randomness.

Two of our e-commerce clients, with budgets in the hundreds of thousands per month, now see better conversions on AdSense than on pure search traffic for some of their campaigns. Plus, the CPCs billed by Google are about the same or slightly lower than for pure search, and AdSense volume is very high.

Could it be AdSense runs ads on reviews, ratings, or articles on the types of products the ads promote? Does AdSense run on blogs supporting or raving about the ads’ products? Are the ads so well written that even before they click, surfers have decided they want what the merchant can deliver?

We don’t have all the answers, but we do have the data. By all indications, AdSense is working. Business-to-business (B2B) clients are also seeing great results. I’ve gone from skeptical to impressed. The combination of better targeting and Smart pricing delivers for many clients.

If you turned off AdSense, it may be time to reevaluate and retest that decision. You can test on a campaign-by-campaign basis to be prudent. The new combination of improved targeting and normalized pricing is a one-two punch that turns AdSense into a winner for many campaigns. Perhaps yours is one of them.

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