My regular readers know I am a big fan of ignoring prevailing wisdom and choose to experiment constantly in order to find my own answers. If there is one area where this approach has paid off nicely it's with Adsense. I have read numerous articles and comments from others who offer advice on this topic and quite frankly most of what you read is either wrong or misunderstood. To make money with Adsense you have to do two things; optimize your blog and each page on your site for a single keyword and then drive targeted traffic to that page. That second requirement would be better stated as "ONLY" drive targeted traffic to that page.

I want to take care of an Adsense myth right from the start.

"If you have a low CTR (click through rate) then you are probably smart priced."

This is absolutely wrong.

If your Adsense ads don't convert well for the advertiser then the advertiser is only charged a fraction of the amount he or she bid for the ad placement. We are only talking about content ads here - the ads that show up on publisher's blogs and websites.

If you are running ads on your blog that an advertiser has bid $0.50 per click on and your traffic clicks the ads and doesn't convert well for the advertiser then Google will not pay you the usual $0.25 per click. They will likely give you $0.01 to $0.05 per click. This means you have been smart priced. This will also mean that you will receive lower payouts on every site you have Adsense on - not just the poorly converting site. This is a penalty because you are not optimizing your Adsense pages in order to give the advertiser the most bang for his or her buck.

Give the advertiser the most bang for their buck!

That simple statement is the key to making good money with Adsense.

People have assumed that a low CTR is responsible for smart pricing. It isn't responsible for smart pricing but rather it can be a symptom of a poorly optimized page or poorly optimized traffic. Poor conversions are responsible for smart pricing - low CTR is just a side effect. There are many times though that a low CTR is just a matter of ad placement - your sidebar will have a poor CTR but your main ad block will have a high CTR. Both ad blocks still pay out a decent CPC regardless of number of clicks.

Let me use an example to explain this.

Let's compare two blogs writing about the same topic. Both use the same keywords.

Blog A is called everythingaboutwidgetsdotcom and Blog B is called bluewidgetsdotcom.

Blog A has several posts on the home page each with a snippet of text and a "more" tag - the "click here for further reading" link that will take the reader to the page with the full text.

Blog A has several snippet headers on the front page. Each snippet header is about a different widget.

"All about Blue Widgets"

"All about Green Widgets"

"All about Red Widgets"

The Adsense bot will read the page and conclude (correctly) that the page is about 1) Widgets in general, 2)Blue, Green and Red Widgets.

It will call for ads about widgets in general and ads for blue, green and red widgets.

Now Blog B only has 1 post on the home page. It is about Blue Widgets. In fact every post on the blog is about Blue widgets and nothing else.

The Adsense bot will give Blog B ads about Blue widgets.

On the face of it both blogs are optimized fairly well. Blog A is definitely optimized for widgets in general and Blog B is optimized for Blue widgets.

Now let's assume they know how to SEO and both blogs get ranked high in the serp's.

Blog A gets ranked for "Widgets".

Blog B gets ranked for "Blue widgets".

Google sends both blogs traffic. The traffic for Blog A is looking for "widgets" and some of the visitors are likely to click an Adsense ad. Some will click on the "widget" ad, some will click on "blue widgets", some on "green" and some on "red".

The Blog will get paid decent for those clicking on "widget" ads but not very well for the colored widget ads. Why? Because the traffic was looking for widgets and not "blue widgets" and will be less likely to convert for the advertisers of the colored widgets. Will the blog be smart priced? No - not likely, as the traffic will still convert OK - just not great. The blog will just make less than it could if it were better optimized. The blog will not get the best Adsense ads. It will get the cheaper CPC (cost per click) ads and the poorer performing ads.

Blog B on the other hand only gets Google traffic from people searching for "Blue Widgets" and all of its Adsense ads will be for "Blue Widgets" and everyone who clicks the ad will be more likely to convert and the blog will get the best payouts. The Blog will also get the best performing ads.

What are "The best performing ads"?

The best performing ads are not necessarily the highest paying ads.

Huh?

Very few people understand this so let me use another example. Would you prefer to get an ad that pays you $1 per click but only gets 10 clicks a day or would you rather have an ad that pays you $0.40 per click but gets 100 clicks a day?

Note: Google knows which ads get the most clicks - regardless of cost - some ads are just better written and draw people in better.

If you did the math then you will realize that the $0.40 per click ad is more desirable and is the "best performing ad".

If you are using Adsense then you need to understand how Adwords works.

The advertiser bids on keywords. If the advertiser's keyword is perfectly optimized for their landing page then Google will charge the Advertiser less for both the serp listing and for the content ad placements. If the advertiser's landing page is not well optimized for the keyword then they will have to pay more for the ads - sometimes a lot more. Let's use the term "make money online". If Advertiser A bids on this term and the landing page is perfectly optimized for "making money online" then they will be charged less than Advertiser B who's landing page is about "Forex" but he wants traffic looking for the term "make money online".

Google will charge the "Forex" advertiser a lot more money for the ad and place the ad on lots of crappy "make money online" blogs. Crappy in the sense that these blogs will not be perfectly optimized for "make money online" or "Forex" - most likely on blogs that have an affiliate page about Forex. The publisher won't convert much because the traffic clicked a make money ad and landed on a Forex page and the advertiser will pay a lot for this worthless click. The publisher will however get a good CPC out of the deal - just not many clicks because they have little traffic.

Advertiser A on the other hand gets rewarded by Google for its high quality score (its keyword and landing page are perfectly optimized - this equals a high quality score) and besides being charged less Google will only put the ad on the "best performing" blogs.

The best performing blogs are those that, like the advertisers landing page, are the best optimized for the keyword and have the most targeted traffic for the keyword.

This is a bit confusing so lets look at an example.

The blog you are reading is extremely well optimized for the term "make money online". The easiest way to know this is by looking at this blogs serp rankings. It ranks highly for most of the "make money" keywords. Now, even if it wasn't ranking well for the keywords the blog and posts are still optimized for the keywords. If the majority of your pages get the same ads regardless of the individual post topics then you have successfully optimized your entire blog for a certain keyword. If every page on your blog gets different ads then your blog isn't optimized for one topic. If you want the best performing ads for your main keyword then you have to optimize your entire blog for them and not just a few pages.

As a publisher you want Google to place the best performing ads on your site. To get the best performing ads you have to be just as optimized as the advertiser.

If you are reading this and you live in Canada or the United States then you see the best performing "make money online" adsense ad up top (above the fold) on this blog. If you live anywhere else then you see different ads - probably a block of four ads. This is because the advertiser has picked the location he wishes to advertise to. Only people with Canadian or American ISP's will see the ad. The advertiser does not want anyone else clicking the ad.

This ad appears on my site day after day and it converts well. I banned it from my blog a week ago in order to see how well it performed. The ads that replaced it paid just as much or more per click as this ad but I received 60% less clicks. Meaning I made much less money by not having this ad on my blog. In case you are interested the ads on my sidebar pay more per click than the top ad but don't get a fraction of the clicks. When I banned this ad it was replaced with an ad block containing multiple ads.

Out of curiosity I checked the Adsense ads on my main competitors sites just to see what kind of ads they were getting. They all show multiple ads in their ad blocks. My ad blocks are usually only a single ad. Guess which gets a better conversion? The ads my competitors get are the ads I got when I banned the Gerber Ad. They don't produce anywhere near the same income.

Needless to say - I unbanned the Gerber ad and my revenue returned to normal.

So what does this mean?

It means that Google will give the best performing ads to the best performing publishers. The advertiser gets charged less and gets his ad placed on the best blogs for the keyword. The publisher gets less CPC but gets a lot more clicks. It's a win/win for both parties.

Targeted Traffic.

I said at the beginning of this post that you only had to do two things to make good money with adsense; perfectly optimize your blog for a single keyword and then drive targeted traffic to it.

If we go back to the widget example let's look at what happens when the two blogs don't get the right type of traffic. As they currently stand I said both were ranking well in the serp's and neither would be smart priced. Blog A will do OK with adsense but not great. Blog B will do much better as the blog is better optimized for the traffic from the serp's.

Now imagine that neither blog gets serp traffic for their respective keywords or very little compared to other types of traffic.

If you are a proponent of using social media to get traffic to your blog then pay attention. Let's say most of your traffic comes from stumblers and entrecard and RSS subscribers and Digg etc. If you have Adsense on your blog you run the risk of being smart priced. Most of these social visitors will never click an ad - and that's a good thing. Unfortunately a few will click an ad from time to time. When they do Google knows where they came from and knows that they aren't targeted traffic looking for widgets. They are just casual browsers and if you get too many of these casual browsers clicking your ads then Google will discount the hell out of the CPC in order to compensate the advertiser who is getting really crappy traffic from your site. Google will smart price you until you provide quality traffic.

Social traffic is not quality traffic and if you get a lot of it then you had best not have Adsense on your site. Period.

Because you have a lot of social traffic that rarely clicks ads you will have a very low CTR - hence the misconception that low CTR means you are smart priced. You aren't smart priced because you have a low CTR, you are smart priced because your traffic is crappy and not targeted for the ads. You get a low CTR just because most of your traffic doesn't click ads.

My sidebar ads are all low CTR - under 1% and yet they bring in up to $5 a click. They aren't smart priced - they just don't get a lot of clicks. The top ad block gets the bulk of the clicks.

How to tell if you are doing things right.

For the most part, the first visitors I get to my site each day come from Asia and Australia. This is because they get up first. Then later Europeans and Africans start showing up and finally North and South Americans. The sad fact is that most advertisers using Adsense are North Americans and as such they basically only want traffic from North Americans. (Most only have products available in the US or Canada) The best paying ads and highest converting products tend to be by and for Americans and Canadians. This isn't fair, it sucks and in the end comes down to the reality that European and Asian businesses have yet to take advantage of the internet to the same degree as North American businesses. If your traffic comes from mostly US and Canadian visitors then you will get better Adsense Ads. If your traffic is mostly from elsewhere you will get poorer paying ads and also run the risk of getting smart priced.

The first clicks I get each day are from Asia and Australia - my CPC always starts off low. Later in the day my CPC increases, sometimes quite dramatically. This is because the clicks are now coming from the US and Canada - the people my best ads are targeting.

If you see the same trend then you are doing things right. If you start off with higher CPC and see your CPC drop over the course of the day then you are not doing things right. It means you are getting more less desirable traffic than desirable.

This happens when the bulk of your traffic comes from countries other than the US and Canada. This also happens when the bulk of your traffic comes from sources other than the search engines. In both cases you are getting the wrong traffic. If this is the case remove the Adsense ads from your site and start optimizing it for the search engines.

It all comes down to conversions for the advertiser. The only way you will get good converting traffic for the advertiser is by providing them with people looking for what they are selling.

The only way to guarantee that your traffic will convert is by ranking well for the keyword the advertiser is chasing. My best advertiser is looking for people looking to "make money online". The ad says "Make Easy Money Online". Most of my traffic - about 75% find my blog searching on Google for the term "make money online" or a long tail version of that term. If one of my visitors clicks on the ad they are most likely looking for what the advertiser has to offer and even if they don't buy, Google can charge the advertiser full price because the visitor left a "make money online" trail. They found me using the term and they found the advertiser because of the term. That is as targeted as traffic can get and Google can charge the advertiser full price. If all my traffic came from stumble upon and clicked the ads then the advertiser wont get many conversions and Google can see where the traffic originated, knows it isn't targeted and will penalize me and give the advertiser a rebate.

That folks is how Adsense works.

In Summary.

To make money with Adsense;

You have to target a specific keyword - not a general one.

You have to optimize your entire blog for the keyword - not just a page for this and a page for that. (This can be done but until you know how - don't!)

Only ONE post per page - yes I mean the home page too. Most people will get sent to your homepage and if you have a bunch of snippets for different keywords you will have a bunch of different ads showing. This means the person who found you for the "blue widget" keyword may click on the "green widget" ad. This isn't targeted. You will never get the best performing ads if your blog is not perfectly optimized for the ad. You can't be perfectly optimized if you blog about different topics.

If your site is about widgets then you had better only get widget ads. If you are about blue widgets then you only want blue widget ads.

The only traffic you want to your site is targeted. This means search engine. You never want social traffic. You can target specific forum traffic if it is centered around your keyword but be aware that the CTR will be low.

This in a nutshell is my system. Yes there is a different method you can use and quite frankly it is the more common form. Many practitioners choose to go with quantity over quality - they basically create hundreds or thousands of pages on many sites all poorly optimized and smart priced but still make a decent buck just because of the volume of clicks. The danger is that they use Adsense tricks to get people to click ads and the sites are clearly built for Adsense and contain little useful info. This is a violation of the Adsense TOS and if caught they risk getting banned.

Note: I didn't buy Joel Comm's Adsense Secrets book but I did check out some of his blogs that have Adsense on them. I don't know what his book is about but it only took a few minutes to realize that his sites were poorly optimized and smart priced so I assume if he makes money with Adsense then he is a practitioner of quantity over quality. His sites had little content - lots of Adsense (typical made for adsense sites) and the blocks were showing ads for Bowel Cleanser and Family Vacations in the same ad block. (A sure sign of smart pricing) I, however don't recommend this as you have to do a lot more work and run the risk of losing your adsense account. It may work but not as well as my system and it is a lot more risky.

I have less sites using Adsense but they are all highly optimized for my keywords, they all have a lot of useful content, they all get the best performing ads and they all get the bulk of their traffic from Google's search engine for the keywords they are optimized for. This is a system that is both safe and effective and it will continue to work for as long as Adsense exists.

An optimized blog plus targeted traffic equals a healthy Adsense paycheck.

That's all there is to it.