Google's Ad Network Spreads the Wealth

Google's Ad Network Spreads the Wealth
PC Magazine, August, 2005 by David Murphy

Keeping Kuro5hin members happy is easy. As a collaborative discussion site on technology and culture, with members numbering in the tens of thousands, Kuro5hin has a community that moderates itself. When a user submits an article to the site, it eventually has to run the gauntlet: All Kuro5hin's members have the opportunity to vote yea or nay on whether and where the article will appear on the site. But try to advertise to Kuro5hin members and the response may be less structured. "Our community is one of those where if there was going to be any opposition to an ad format, they would let you know about it," says Rusty Foster, Kuro5hin's founder. "A lot of them are rabidly opposed to advertisements."

Still, Foster turned to Google's AdSense program in late 2003 as a way to increase revenue for the site, and the text-based advertisements—still running today—have paid off in more ways than one. In general, members have accepted the ads, which are now an important facet of Kuro5hin operations alongside the site's in-house text advertising and blog ads.

Kuro5hin is just one of thousands of Web sites that participate in Google's AdSense, an advertising program that helps even the smallest sites bring in revenue through clicks on site-placed advertisements from Google's massive ad network. "It's good. It's definitely an essential piece of the overall strategy. I know a lot of people rely on it entirely for their revenue, but I'm wary of that," says Foster.

After you set up an AdSense account, you just copy and paste a block of Google HTML and targeted ads start showing up on your Web site. You can elect to run ads based on content or to establish an advertisement-filled Google search on your site. If your Web site is about cars, for example, the AdSense software is smart enough to display advertisements about cars. Or, if you set up a Google search box on your site, the results of visitors' searches will also feature advertisements matched for relevance. When a user clicks on an ad, you get paid. Google is mum about exactly how much money per click it pays sites.

The money comes from the dollars advertisers spend in Google's AdWords program, which is designed for Web advertisers. AdWords members' advertising campaigns are based on keywords; members decide on the amount they're willing to pay Google every time their keyword advertisements get clicked. They can increase the advertisements' potential by increasing the amount they're willing to fork over. For example, if you pay Google $50 a click, your advertisement will be more likely to appear than if you pay $0.05 a click. But the ad's success will still depend on its keywords and overall click-through ratio.

"By showing relevant ads, Google ensures that users continue to find them useful, continue to pay attention to the ads, and continue to click when they are interested in products and services," says company spokesperson Barry Schnitt.

Though Web sites are adopting AdSense in increasing numbers, "click fraud" is a growing cause for concern with the AdWords system. Users can fraudulently click on a competitor's advertisements to jack up its advertising costs—and possibly force the ad off-line, if the cost of the day's clicks hits a set limit.

"Competitor A wants to stick it to competitor B just out of spite, and that can be in a small mom-and-pop type competitive landscape, or that can be some of the biggest Fortune 500 companies out there," says Jessie Stricchiola, president of the search-engine marketing firm Alchemist Media. "Every time they visit Google, they just want to search and click once or twice on a competitor's ads, just to stick it to them."

It's estimated that at least 10 to 20 percent of all clicks are fraud-based. Google detects and refunds money lost from fraudulent clicks, but advertisers who independently monitor AdWords' performance have found additional activity that costs them money.

As Google works toward increasing the competitiveness of its advertising programs, it plans to intensify its efforts at combating click fraud. Advertisers and aspiring moneymakers end up choosing AdWords and AdSense for the strength of the programs, says Schnitt; in the Google model, he adds, click fraud will eventually correct itself.

See Making Cents with AdSense.

Copyright © 2005 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in PC Magazine.