Google AdSense as a Terrible Business Model

I am still a fan of AdSense as a way of determining a baseline income potential for a site, but I don't see it as a long-term viable business model for most small publishers. Why?

Smart Pricing (or Maybe Dumb Publishing?)

I friend told me how much he made from AdSense a year ago, and in spite of increasing his network pageviews 200% since then his earnings this month are 10% lower than they were a year ago.

And Google still does a sloppy job policing their partner network. What happens if their editorial review costs increase. What does that do to the percent of ad income Google needs to keep to keep growing?

A Glut of Publishing:

It is getting easier and easier to publish online. The number of people writing is probably growing at a faster rate than the number (and income of) of people reading, which means you will have to be more compelling and put more effort into your content and marketing if you want to keep your pageviews up.

And Google has been placing more weight on authoritative domains, which is squeezing many small players out of ranking in the search results.

Newspaper & Magazine Archives: More Glut:

As business deals are worked out, and trusted archived content comes online, many business models based on AdSense spam will lose a large portion of their traffic to mainstream media companies that are not currently fully leveraging their archives.

If Google bought YouTube how long before they buy Olive Software or create a similar technology?

Frothy Ad Market:

I just saw a big, ugly, and obtrusive AOL ad on Amazon.com's home page. If people are buying general untargeted graphic ads on the largest retail site they must be overpaying for it.

A Lack of Competition:

Some of the executives of Yahoo!'s Publisher program recently announced they were quiting, and with Google's lead in the contextual ad space with virtually no competition, I have to take that as a bad sign for Yahoo!, and for independent publishers in general.

Google's General Arrogance:

Today many publishers noticed bright Google logos in their ad boxes inviting readers to sign up for AdSense.

Potential Text Ad Blindness:

People have learned to ignore banners and common ad locations. How long until people learn to ignore common AdSense formats, especially as the ads appear so prevalently on so many sites? What if people become more receptive to identifying ads (even in the content area)?

Not Worth It:

Add all those up and it gets a bit bleak looking to AdSense as anything more than a baseline estimate for effortless income or a backfill for unsold inventory.

What if instead of monetizing every page, niche publishers used most of their pages to keep attention and link equity flowing their way, and then just monetized targeted high value sections of their sites using well integrated affiliate offers and/or selling direct products?

Published: December 12, 2006

New to the site? Join for Free and get over $300 of free SEO software.

Once you set up your free account you can comment on our blog, and you are eligible to receive our search engine success SEO newsletter.

Already have an account? Login to share your opinions.

Comments

Matt
December 13, 2006 - 5:11pm

I've been thinking about this on my sites. I'm to the point now where I feel that I can begin monetizing one of my sites, but the problem is that when I look at AdSense it just doesn't look that appealing ad-wise. I'd much rather be selling contextually relevant ads that better match the theme of my site, but don't know where to start.

If someone doesn't want to use Google AdSense what other options are there for smaller publishers like myself? Are there any ad companies that work with small publishers to sell on a CPM basis like the bigger guys can do?

DWarrior
December 23, 2006 - 2:42pm

I've never in my life clicked on a single AdSense ad, ever since they were introduced, I always saw them as visually separated and not intended to be there by the author.

And now, there's a Firefox extension to block ads, so I never even see AdSense anymore.

December 13, 2006 - 5:46pm

I disagree. (well sort of)

There are a lot of people making a lot of money out of adsense. As they say "make hay while the sun shines". However, in the medium to long term is it a bad idea to rely on only one business model.

So maybe the title of this post should be:

Google AdSense as a Terrible Long Term Business Model

December 13, 2006 - 6:54pm

Hi Matt
I don't think the answer is to look at CPM on small niche sites because there is so little inventory that you are not going to make much from CPM, especially if AdSense does not even have much relevant ad space. You need to sell your ad space either flate rate, or look for conversion oriented offers like affiliate stuff.

Hi Stokelake
Well I think it is worth looking longterm even when considering short term opportunities. I just made a huge AdSense site, but they are good only up until a point. Branded sites keep growing at a much faster rate, especially if you can create a growing brand in a growing market.

December 14, 2006 - 3:28am

Adsense has taught me alot of lessons and as a result I have quite a philosophical attitude towards it. I am not a religious person but to be frank it pandered to my lazy streak - the idea of easy money for little or no work - which is not a good attitude.

I am not a Puritan but I think it can be a slippery slope and for sure it this idea of easy riches that has attracted lots of people. I was lucky - it worked long enough for me and for that I will forever be grateful - but as a long term business model it is very volatile and flaky.

There was a time it was relatively easy money if you had the traffic and it was plausible to make $100k a year from one site. If you had a few high traffic sites - you were in a good place.

You could even build search engines and generate quite high revenue relatively quickly and easily, and if you had a good hold on some websites with finance related traffic then Adsense was killer.

Quite rightly Google has purged some of these areas for quality control reasons though I don't doubt a few remain - personally I do not want to spend my time seeking them out. If you start making enough each month to live well just off Adsense it can affect your business psychology - its easy to start thinking - "oh heck who cares about X.Y,Z ...I got my Adsense coming in".

The inherent problem with Adsense is you make money by getting people to leave your site (via clicking a link) it makes it a very short term model.
The wise marketers in the industry knew 2-3 years ago to build customer and email lists so even if Adsense went tomorrow they'd still have a strong business to support them.

For those riding the short term "click my ads and forever be gone" then the party was gradually over.

Anyone whose tried Adsense out enough will know you can get high click rates from serving it up on lower quality pages. Place ads on compelling article driven pages and you might see a lower click through from the ads because people want to read the amazing articles.

However these days as a powerful business model I can only see it working with high traffic. And to get high traffic you need good quality so this may be the answer. Its valuable to hear people like Shoemoney say he will get a site up to 1000 uniques a day before implementing the ads.

That is a very important concept and a good yardstick. Make your site good enough to get 1000 uniques a day first then go with ads - what good advice. This attitude means a strong business model and will hold anyone in good stead.

Setting out to build lower quality Adsense sites is not a great idea and you may pay more in hosting than you will earn from it. It is not about getting easy money for doing nothing.

Getting a 1000 uniques a day requires some real effort and as a result I think anyone going down this road with this mentality will have the longer lifespan than all the people chasing the 'get rich quick' model. Anyway personally I believe get rich quick is a bit of a myth ( though I am happy to be proved wrong) I just think most successful folk get rich slowly - then after many years it all comes in fast. Well that's what I'm banking on anyway :-).

December 14, 2006 - 4:23am

I don't believe the bad business model is Adsense -- its the sites behind them.

The competition is coming. It might take some time, but it will be here. Seriously, Adsense is a cash cow for Google, you bet Yahoo and other companies are interested in it. Even though things may look dim, I think the fundamentals are there.

As for ad blindness -- Google will switch up the choices. Assuming people are still going to continue reading I see plenty possibilities of combating ad blindness.

Adsense is a very good place to start out. Adsense still remains a very, very easy way to make money online. I can't think of a better way to learn about an industry and get paid in the process.

If you are spending that Adsense money to expand you lifestyle spending on a mortgage or a new boat; yeah, your going to have problems. If you use that money to reinvest in sites & domains, or live modestly and work 100% on the business, I think you'll do alright.

Zeeshan Parvez
December 14, 2006 - 4:47am

I don't think the Adsense model is bad but the quality control is horrible. Websites simply create an extra search displaying results and place Google Ads above and below. Google does nothing about it.

At times it seeems as if Google is in it for the money only. In the long run yes its true both Google and small publishers will suffer. Maintian strict quality control for both advertisers and publishers and you will succeed.

Imagine the kinds of ads dispalyed "Get 1000 dollars in a day!?" I've never clicked on an add or bought anything. Its ridicoulous. Maybe its time for a new search engine

Plus people being to avoid adds over time as stated above. You need new ways to grabbing your readers attention. Try having an add move across the screen if the visitor stays at a webpage for one minute. Or have the screen dispaear for an advertisment and then return the visitor to his/her place.

With time everything wears out. And the only ones who make a fortune quickly are the ones who catch the idea earlier. Once time has passed then, as with everything, its hard work.

December 14, 2006 - 6:17am

As a 1 man company I can say that integrating adsense into my network of job related sites has given me another source of income. I'm glad I did it and the income is rising each month. I consider adsense the 'poor man's venture capital'.

December 14, 2006 - 2:59pm

I think adsense is nice, if you really go for it, create sites specifically designed to generate adsense income and you have sort of multiplier effect with increasing number of sites.

2 Things that are major drawbacks:

Dependency on Google
As a business owner, you always depend on someone. Your customers. Now in most cases, you have several customers, so if one of them should decide not to do any business with you anymore, you'd still have many other customers and it wouldn't hurt you much, if at all.
But with adsense, your sole customer is Google.
Not only is google probably the most important source of traffic, it's also your one and only customer. If they decide to stop serving you adsense (for whatever reason) or to increase their fees, what are you going to do about it? You can't do anything, they are your sole source of income.

Lack of backend
In online business, as in any business, but especially in direct marketing businesses, you often make an unexpensive front end sale, which doesn't bring you much profit, if at all. But you are building a huge list of customers to whom you may sell, bigger, more expensive products, seminars etc.
With adsense, you have no clue who clicked on your ads and have no chance of selling more to them.

All in all I think it's good to learn alot about online marketing, but is definitely not a business model that you want to do in the long run.

Adsense Bloke
December 14, 2006 - 4:22pm

Flavia you make some good points.

Where Andrew J says: " If you are spending that Adsense money to expand you lifestyle spending on a mortgage ...your going to have problems"

I disagree. I think if you have enough money from Adsense to buy property you should.

On the whole property will be a far better long term investment than Adsense as it is a volatile and unstable thing to rely on.

As a supplemental income it is fine but basing a whole business model on it if your not already established or experienced is a very risky thing to do in my opinion.

Matt
December 26, 2006 - 11:35am

First off, I would like to ask how can supporting a website with advertising not be a good long-term business model? It's been the business model for magazines, newspapers, television, radio, and so many other industries.

We run an education website and AdSense has changed our life. We would not have been able to offer such valuable content for free in any other way.

Yes we could have charged subscription fees and
recommended some affiliate products we didn't care about, but we didn't.

We opened our site to the world so everybody could learn for FREE. That is why Google eats up our "completely open" website, that is why word spreads 1,000 times faster than pay-websites, that is why we are making more money than we ever would have with a subscription fee or by selling our product.

It's because of AdSense that we receive thousands of visitors a day, it's because of AdSense people email us every day thanking us for providing such valuable information for FREE, and it's because AdSense that we could start with nothing and now have a lot more than something.

December 26, 2006 - 10:02pm

Hi Matt
The issue is not just ad supported or not...the issue is ad supported while being too reliant on one provider on many levels.

December 27, 2006 - 11:25am

I get around 1000 plus visitors a month on my blog i make virtually nothing on adsense every month.....

Patrick
December 14, 2006 - 10:55pm

Funny yesterday and today I exchanged a couple of messages with a moderator at searchenginewatch, b/c I had read one of his posts about how he wouldnt rely solely on adsense as it takes away from ppl's profit margins...and it totally spoke my mind.

I've only been into SEO and Internet Marketing for 2 1/2 months, now but the 2nd thing I realized after the 'its not ONLY about traffic, conversions matter, too' lesson was that relying only on adsense would probably be a terribly bad call (b/c you sort of rely on chance and the blindness of internet users + having potential income taken away from you..otherwise why would Google use adsense if they didnt leverage it).

But there's one reason I think you didnt mention:

Ive heard of people having their adsense accounts shut down, b/c of suspected click fraud! (I just read a post about somebody having his yahoo ad-thing-account closed b/c of poor traffic quality. Now imagine you're one of those SEOs that decides to 'break free' from his company and do his own thing, works hard 24-7, creates tons of sites. And then some random punk on the internet thinks its funny to play click fraud on one of your sites..or Google shuts your adsense account down for whatever reason they want to.....and then you realize: Damn my sites' topics wont really allow me to create or sell any decent affiliate products or E-Books...or....

I mean that would just be terrible. (So I think the dont put all your eggs in one basket applies to income streams on the net as much as to stocks in the stock market)

December 15, 2006 - 4:41pm

I have always looked at it from this perspective:

If you have enough traffic to make real money on AdSense, why wouldn't you just sell your own ads?

Patrick
December 15, 2006 - 11:07pm

@Mike McDonald: I think the reason why many people don't do what you suggested (and many others including myself suggest as well), is that setting up your own products/ getting involved with affiliate programs is, that they want to do SEO, not online business in general probably thinking it brings a lot of stress, etc. (you have to read up on law, have to think which products to promote, etc. instead of just doing what they're really into - SEO).

I think it's definitely worth it though and probably less complicated than a lot of people think if you sell nothing but digital products.

December 29, 2006 - 2:40am

hey Clyde,

1000 visitors a month probably isn't enough, generally if you can get something like 1 click out of 100, your doing pretty well. I had a website once a while ago and it took me two years to make $100USD on Google Adsense. So yea... Don't expect too much from them ay

December 29, 2006 - 9:37am

My site designed specifically for AdSense does closer to 3,500 pageviews, a 17% CTR, and $250 a day, but the issue I have is that over time it could get squeezed and squeezed...no guarantee that the payouts will increase if the ad prices do, and there is a guarantee that the site will lose marketshare unless I find ways to keep building links or getting people to talk about it.

Charles
December 29, 2006 - 9:28pm

Ok first of all Aaron your book sounds fantastic and I plan to pick it up and study it.

Now I have a question. I am new to this online ad revenue world and I am wondering what you all mean when you say you have a site that is specifically designed for AdSense. Could one of you fill me on on this?

Thanks and keep up the great insights!

December 29, 2006 - 10:20pm

Hi Charles
I can't show my specific sites because some of them might get critiqued and people may try to copy them. There is rarely a profitable business model in being entirely open with everything you do. For instance, note that Google doesn't even disclose what percent they pay out to publishers.

Lea
December 18, 2006 - 8:14am

Adsense is particularly useful for throwing on a new site to see if the site is going to make the money that was estimated in the research, and thus to see if its worth the work of fully building out the site.
Adsense also has the side benefit of trivial site stats.
Not safe to treat it as The income source for longer term, but a useful interim monetisation technique nonetheless

December 19, 2006 - 9:47pm

I think the main issue for business people is as someone has already noted: people click from your site to the adsense site. They may never come back.

That means you haven't converted your visitors into prospects and you can't follow them up with great content and sales messages. Without prospects you don't have a business.

All it takes is for Google to change the Adsense system (as we know they have) in a way that stops your ads working and you start losing money from all the adsense web sites you've set-up. If you rely on Adsense you're dead in the water.

December 20, 2006 - 12:57am

I LOVE adsense.

It's a yardstick.

If you're running a business and you've got adsense all over your pages, I know that there's something wrong with your business. A viable business doesn't need Adsense. That tells me all I need to know about the mentality of the business owner.

If you're a hobbyist blogger with adsense all over your blog, I know EXACTLY a certain element of your character. A bit desperate, a little bit conned by the hype surrounding Adsense. You'll have a low traffic stream, you'll scrape in a few pennies a year, and for that you'll sell your site's integrity and respectability.

If you're a mega site with high, high traffic and you've got Adsense plastered all over your site it's another warning sign. Couldn't you come up with an alternative way of financing your site?

Personally I loathe Adsense. I go out of my way to avoid looking at it. It's become a signal of low quality. And furthermore, I distrust any link that could possibly be Adsense, as I've seen too many con-jobs where AdCents has been disguised as real links.

Patrick
January 5, 2007 - 2:00pm

@Charles: I think by a site specifically designed for adsense Aaron was trying to say, is that it's a great niche, which requires him basically no work once it's set up...maybe he doesnt have any product or affiliate product for that site, but as he gets so many page views, he doesnt even need that.

The other part is, that the ads are made to blend in with the rest of the site. I, for example NEVER click on adsense ads, but through my endless keyword + niche - research Ive found 2 niches with sites..and...I even caught my self clicking on 2 of their ads, because they blended it so perfectly, that I didnt even notice it, even though I had probably not clicked on an adsense ad for the last 12 months up to that point lol..

Those sites are simple niche-sites with hardly any real content, but by people clicking on those ads the webmaster makes enough money for virtually no effort once his site is set-up.

WHAT Ive always been wondering though: If people are sort of 'fooled' into clicking on the ads, is it still any profitable to Google or the people who buy their ads? Or would you possibly take the risk of getting banned from adsense for such sites, if they generate most of your adsense profits?

Is there any alternative for non-US people to adsense (I know yahoo is US only..)? I know those alternatives dont pay as well as adsense, but say you do have a crazy niche-site with 1,000s of pageviews a day and Google banned u for some random reason could you still make some money of it with other ad-programs?

December 13, 2006 - 2:07am

Adsense taught me my first marketing lesson: never put all your eggs in one basket. By this I mean never just focus on one service but branch and find which works for each page and customize it for it's own.

Thank You

December 13, 2006 - 3:45am

www.dmv.org is a great example of the business model you speak of Aaron.

All great information, with seperate sections for affiliate offers that in no way take away from the actual content.

December 13, 2006 - 4:11am

I agree!
People certainly have AdSense on the brain too. There are lots of potential ways to monetize, and AdSense does NOT work well on many sites regardless of traffic.

And Google, at least the AdSense people, are horribly arrogant (I say that, and I'm a Google fan too!).

That said, I've know people making 6 figures from AdSense. Sometimes it's a charm

December 13, 2006 - 4:13am

I have a site that might bring in low 6 figures next year in AdSense revenues, but I am not sure that it is worth the effort it took to build it, especially considering how many other things and how much knowledge I leveraged to have it do that.

J
December 13, 2006 - 4:16am

Aaron, you are absolutely right...I've been thinking of renaming Adsense branding to Ad-cents...smaller niche publishers like myself do not benefit much from Adsesne.

Probably the best way for smaller niche sites to generate revenue is through their own products. Another key point that Aaron has suggested is that you would not want to lose traffic by passing them along to competitive sites in your niche.

It's not worth it.

December 13, 2006 - 4:19am

If you are small and niche I don't think it hurts to link out to competing sites or even to feature their brand or their owners as content. You can get exposure and work your way up the social ladder by siphoning off their brand value. But I think there is far more value in featuring them and recommeding them than in having them mentioned in an ad. Interviewing people, for example, is an easy way to get great content and build mindshare.

December 13, 2006 - 4:40am

Google should have a stricter approving system for publisher.

A website should be review for quality standard before it can show Adsense's Ads. It will reduce the number of spammy MFA site.

December 13, 2006 - 5:48am

Aaron, These are great points,

Web pages are going up at an exponential rate when compared to the growth rate of readers/viewers. But ask yourself how much of this is truly compelling content that is going up. I am just glad the US population passed 300 Million. Maybe we should all learn Chinese.

I have trouble with this though:
"What if people become more receptive to identifying ads"

My reason/question is this: first of all , most frequent web users don't know the difference between paid and natural search results on G,Y, MSN, etc... furthermore, if the ads were/are well targeted, why would they start minding?

cheers all, seasons greetings!

December 13, 2006 - 6:50am

I believe people are generally inherantly distrusting of ads.

New to the site? Join for Free and get over $300 of free SEO software.

Once you set up your free account you can comment on our blog, and you are eligible to receive our search engine success SEO newsletter.

Already have an account? Login to share your opinions.

  • Over 100 training modules, covering topics like: keyword research, link building, site architecture, website monetization, pay per click ads, tracking results, and more.
  • An exclusive interactive community forum
  • Members only videos and tools
  • Additional bonuses - like data spreadsheets, and money saving tips
We love our customers, but more importantly

Our customers love us!






    Email Address
    Pick a Username
    Yes, please send me "7 Days to SEO Success" mini-course (a $57 value) for free.

    Learn More

    We value your privacy. We will not rent or sell your email address.