A blog’s potential with AdSense

Noemi writes about Blog monetized by Google Adsense?. The Filipino Librarian emailed me and Marc a few weeks back about the same. Since I believe Marc has still a lot of backlogs in his Inbox, I’m taking this one for the meantime.

For the uninitiated, projecting the prospects of your blog to earn from AdSense is close to impossible because of a lot of factors involved. As a point of reference, when we talk about a good prospect from AdSense, it means that you regularly (read: monthly) receive a cheque from Google. That means, you ought to earn at least $100 by the end of each month to be able to say your blog is doing good.

For the regular 8 – 5 office employee, this amount may represent somewhere between 10 to 50% of their salary. Let’s just say it’s 25% — that figure is still significant. (Read my “Has Adsense been good to you?” for some classic examples of these.)

Going back to the topic, when we want to compute the “prospect” of a blog (or even a website like a forum or portal) to significantly earn from any contextual advertising programs like AdSense, we look at several major factors and inject them into this formula:

Potential Monthly Revenue (PMR) = {average daily pageviews} * {click thru rate} * {cost per click} * {revenue share} * {30 days in a month}

The average daily pageviews is self-explanatory with the assumption that this is also equivalent to your ad impressions (how many times the ads are viewed by the visitors). However, if you have two ads placed on a single page, you get 2 ad impressions per pageview…. and so on and so forth.

The click thru rate is the ratio between the number of clicks on the the ads over the total number of ad impressions (or pageviews). The average for blogs here is between 1% to 3% (based on experience). This figure is influenced by ad placement or how you blend your ads close to your content, ad relevance or how the ads are related to your content and your niche or what type of people are visiting/reading your blog. The more internet-savvy your visitors, the lower the chances they’d click on your ad. Additionally, regular and repeat visitors do not frequently (or not at all) click on ads while accidental visitors (those who found your blog thru search engines) are more likely to click on them. Thus, it’s good to know how many of your visitors come from search engines.

The cost per click (CPC) is more complicated to determine because it depends on type of ads that appear on your blog. A good rule of thumb here is that if the ads are for products or services that are expensive, then the cost of the ad should be high as well. So, an ad about flower deliveries that costs $20 may have a CPC of say $0.20 while an ad for digital cameras might go as high as $2.

Up until now, there has been no clear statement as to how much is the percentage share between Google and the publisher (you). A recent article in New York Times puts the figure at 78.5% (something which I highly doubt). My hunch is that it’s just in the proximity of 10-20%. (How else can one get a $0.01 click?)

How about we plug in the numbers? Say a very optimized digital camera blog with 5k pageviews:

PMR = {5,000 pageviews per day} x {3% CTR} x {$2 CPC} x {20% rev share} x {30 days/month}

PMR = $1,800 (nice figure huh?)

Let’s look at your regular personal blog with 1,000 pageviews/day:

PMR = {500 pageviews per day} x {3% CTR} x {$0.20 CPC} x {20% rev share} x {30 days/month}

PMR = $18 {does your blog comes close to this number?}

You will notice that the two most significant elements in the formula are the CTR and the CPC but of course one cannot also ignore how your traffic comes into the equation.

Use this formula and see if it holds true for your blog. Please note though that it’s against Google Adsense’s policy to reveal details fo your revenues (except total monthly earnings).