Written on December 10th, 2004 at 06:12 pm by Darren Rowse

Is Contextual Advertising Viable on a Blog?

Advertising, Adsense 5 comments

There has been an increasing amount of debate recently over both the ethics and viability of blogging commercially. The focus of this post is not to enter into the question of ’should bloggers add income streams to their blogs’ - rather I want to examine whether it is a financially viable alternative.

I know of many bloggers who have added contextual ads to their blogs expecting to make a fortune only to discover that it can be a lot harder than it looks - on the other hand I suspect there are a lot of bloggers out there who could actually make some reasonable money from their blogging without too many modifications if they just tried. Let me show you how….

To examine the question of whether blogging for profit is viable I want to focus this post upon contextual advertising (knowing that it is only one of many ways to add an income stream to a blog). By contextual advertising I am referring to programs like Google’s Adsense and Yahoo’s Overture.

3 Keys to Contextual Advertising Success

If you strip down what is needed to have success with contextual advertising there are three main elements that impact your earnings. To put it most simply these three elements are:

- impressions (the number of times ads will be served to your blog - ie the traffic/page views) - I’ve written a number of guides to how to increase your traffic including this one
- click through rate (CTR) - (what percentage of impressions will result in a reader clicking on an ad - and therefore send a micro payment your way). Getting a high CTR is dependent upon a number of things including well designed and positioned ads and getting relevant ads.
- ad value - (the amount that each click generates - which varies depending what the ad is for. This is largely determined by the topic you blog about - eg. blog about match sticks and the ad value will be low - blog about conference calls and it will be higher) - you might like to check out this post on getting high paying ads for Adsense to help you in this area.

To answer the question of whether contextual advertising will be viable on your blog you need to think about each of these areas because they each will impact your earnings. To put it bluntly - if you increase any of these elements it will improve your earnings. Conversely if any of these elements are low it will decrease your earnings.

It makes sense really if you break it down. If your blog has no readership it doesn’t really matter how high your click through rate or ad value is - you’ll not make any money. On the other side if you have heaps of readers but none are clicking on ads you’ll not turn a profit. Likewise if you’ve got high readership who click a lot of ads, but the ads are not valuable you’ll decrease your profits. Its all about balance.

How Much?

Ok - that is the theory - but you’re probably asking - how much traffic, how high a click through rate and what sort of ad value do I need? There is no simple answer to this question as everyone’s blog generates different figures - but it is possible to do some hypothetical calculations.

Anyone can do the sums. I made an excel spreadsheet a while back that helped me think this through - it is too complex to post here - but let me attempt to break some of it down below.

At 1% CTR

This first table is assuming that a blog has an overall Click through rate of 1%. The left hand column shows daily impressions ranging from 1000 to 250,000, the next column shows 1% of these - ie how many daily clicks a blog with a 1% CTR would have. The following columns show how much would be earned if clicks were valued at an average of 1 cent, 5 cents, 10 cents or 50 cents.

Impressions Clicks $0.01 $0.05 $0.10 $0.50
1,000 10 0.10 $0.50 $1.00 $5.00
2,000 20 0.20 $1.00 $2.00 $10.00
3,000 30 0.30 $1.50 $3.00 $15.00
4,000 40 0.40 $2.00 $4.00 $20.00
5,000 50 0.50 $2.50 $5.00 $25.00
10,000 100 1.00 $5.00 $10.00 $50.00
50,000 500 5.00 $25.00 $50.00 $250.00
100,000 1000 10.00 $50.00 $100.00 $500.00
250,000 2500 25.00 $125.00 $250.00 $1,250.00

At 2% CTR

The next table is the same except for a blog with a 2% Click Through Rate (which is generally accepted as around the average for most sites displaying Contextual ads).

Impressions Clicks $0.01 $0.05 $0.10 $0.50
1,000 20 0.20 $1.00 $2.00 $10.00
2,000 40 0.40 $2.00 $4.00 $20.00
3,000 60 0.60 $3.00 $6.00 $30.00
4,000 80 0.80 $4.00 $8.00 $40.00
5,000 100 1.00 $5.00 $10.00 $50.00
10,000 200 2.00 $10.00 $20.00 $100.00
50,000 1000 10.00 $50.00 $100.00 $500.00
100,000 2000 20.00 $100.00 $200.00 $1,000.00
250,000 5000 50.00 $250.00 $500.00 $2,500.00

So a blog with a CTR of 2% that has 5000 daily impressions and ad value averaging at 10 cents per click will earn $10 a day whilst one with 50,000 impressions at 5 cents per click will earn $50.

At 5% CTR

Lastly we’ll do the same exercise for a blog of 5% CTR. It might sound high but its not unheard of for highly targeted sites to achieve this sort of rate or higher.

Impressions Clicks $0.01 $0.05 $0.10 $0.50
1,000 50 0.50 $2.50 $5.00 $25.00
2,000 100 1.00 $5.00 $10.00 $50.00
3,000 150 1.50 $7.50 $15.00 $75.00
4,000 200 2.00 $10.00 $20.00 $100.00
5,000 250 2.50 $12.50 $25.00 $125.00
10,000 500 5.00 $25.00 $50.00 $250.00
50,000 2500 25.00 $125.00 $250.00 $1,250.00
100,000 5000 50.00 $250.00 $500.00 $2,500.00
250,000 12500 125.00 $625.00 $1,250.00 $6,250.00

Hopefully these tables will give you some idea of the potential of Contextual advertising like Adsense and Overture. One of the cool things about looking at it this way is that you can see a variety of ways of making good money. You can actually make as much money with a small readership on a good paying highly targeted blog as you can on a site with massive readership but a low paying topic. Of course without giving it a go you’ll never really know what sort of CTR or Click Value you’ll get.

A common question people ask in Adsense forums is ‘how much is your average click value?’ Unfortunately to answer this question would violate Adsense regulations - all I can really say is that it varies greatly between sites depending upon the topic being blogged about. It can range anything from a cent right through to dollars (some report clicks of $50+). Of course the higher the click value the harder it is to get impressions due to competition - so sometimes medium ad value terms can be a better bet unless you have a very high page rank.

The tables above should hopefully provide a little inspiration for some but also a reality check for others. Making money using contextual advertising is NOT easy money. To have a blog with a high level of impressions, good CTR and ad value takes a lot of time, energy, patience and a bit of luck (you might like to use my Adsense for Bloggers Series to help you improve these different aspects of your blog’s performance.

So is it worth it?

All in all my advice to people wanting to experiment with Contextual advertising is that its worth a shot. You’ll never know what sort of return it will bring unless you apply and add the code to your site. Don’t go into it expecting the world - when it comes down to whether it is viable it all comes down to your own opinion of the value of your time - the purpose of your blog - your willingness to put in the hard work and time to grow it. Each of us can only answer that question for themselves - and I answer the question of whether blogging is profitable using contextual advertising with a ‘YES’.

5 Responses to “Is Contextual Advertising Viable on a Blog?”

  • that is one of the most helpful and realistic breakdowns on the topic that I’ve seen. You’ve shown the incredible potential but also the fact that its hard work.

    I love looking at it this way because it shows that a number of ways are possible. I have a blog with a small readership that makes excellent money because its a high paying ad value and highly targeted - so you’re right - its not just all about big traffic.

    Great post.

  • I did a comparison of my success with Adsense on my blog as compared to business sites last month and found that while I’ve done very well on my sites generally the use of Adsense on the blog was almost not worth the trouble of adding the code.

    You can check out the post I did if you like, it was on November 10 at the site I signed in with. I looked at my Adsense channels and compared the CPM ($ per thousand clicks). My experience with Adsense is almost a year at this point. I have a couple of nonblog “channels” that are performing above $35 CPM, with one at almost $50. My political blog is under $1 and a business related blog that’s been up long enough to get some meaningful numbers is also running under $1 CPM. The business blog has the benefit of upping traffic to the business related site as a whole. The nonblog pages on that site do much better in Adsense revenue and also bring me personal sales business (in real estate), so I look at that revenue as meaning more. On my political/personal blog, I took Adsense down to make room for a picture of Santa Claus and some Christmas lights.

    Bottom line. I’d look for these kinds of ads that pay per click to be something that will defray the costs of hosting for standalone blogs. If you can get pay per impression instead of per click (think Tagwords instead of Adsense), you’ll do better. I’d also suggest looking beyond ad sales to how you can integrate a blog presence into a larger web business presence.

  • Thanks for your comment Tom - i’ve just had a read of your post and can i suggest you remove the details of your earnings because you could get your account cancelled by Google for revealing those details.

    Also in reading your post and having a look around your blog and other sites I’d suggest that the reason your blog did not perform very well in comparison with your other sites with Adsense is because your blog is very general in topic.

    Your other sites are very focused in content (all on the same topics) and therefor will present people with ads that are highly related to what they come to the site looking for. As a result people are more likely to click through.

    I too run adsense on my personal blog and the earnings are very meagre in comparison to my more targetted blogs.

    Also you talk about your CPM - I actually don’t find CPM to be a very useful statistic. You see you can have a very high or very low CPM and still make good or no money. It just tells you how much you make per 1000 views - however some sites have 1000 views a lot quicker than others. So one site might have a CPM of $1 but have 100,000 impressions per day (and make $100) whilst another site might have a CPM of $40 but only have 10 impressions per day (and therefore take 100 days to make $40).

    So your sites might have healthy CPMs in comparison to your blog, but your blog might actually be a better earner (not that thats what I’m saying is the case for you - just suggesting CPM might not be the best measure to compare blogs with).

    Anyway - thanks for your comments - interested in your experience.

  • Is Contextual Advertising Viable on a Blog?
    Is Contextual Advertising Viable on a Blog? - A nice realistic look at the topic with some breakdowns of numbers. Useful even if your site isn’t a weblog.

  • You can’t convince me Darren! :)

    Seriously though, very nice post. You certainly know what you’re talking about. You should be selling this information, not giving it away!

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