Why Your Google AdSense Earnings Drop

Not a long time ago I saw a guy opened a post in a famous webmaster forum, asking why his Google AdSense earnings were dropping gradually overtime, whereas at the same time his traffic remained almost the same and his site underwent not a single change. Well, as you may know already, AdSense earnings equal Traffic * Click-Through-Rate (CTR) * Pay-Per-Click (PPC). Given that the traffic and website are unchanged, the only factor that could have to do with his declining earnings should be PPC.

So why is his PPC declining? PPC, as the name told us, is the per-click price that the advertiser is willing to pay to Google in order to get his/her ads display in a favorable place either in Google search engine network or Google content network. (In reality, the PPC will be divided between Google and website publishers. Here for the sake of simplicity, I don’t distinguish between PPC that goes to website publisher and the one that goes to Google). Clearly, the reason that PPC is declining overtime is that the advertiser is paying less and less for Google’s AdWords. Why is that the case? Basically, I think there are three major reasons here.

First, online advertising industry is increasingly competitive. That means, advertising companies need to adopt every means in order to compete with each other. One direct result of the fierce competition between advertising companies is the lower advertising price that companies/individuals could enjoy nowadays, which in the mean time means that poor website publishers have to accept much smaller ad revenues than before.

Second, Google advertising network is evolving rather quickly. No matter the search network, or the content network, the volume of ad places is exploding at an unprecedented pace. As the demand and supply law of economics tells us, higher supply of ad places will lead to lower equilibrium price of ads, which is exactly the case for Google AdWords’ PPC.

Third, advertisers are becoming more and more adept at Google AdWords. As you know, the ad place that one’s ads will display in Google’s advertising network is not only determined by maximum CPC bid, but also by so-called quality score. Quality score is reversely related with the PPC that a company or an individual has to pay for Google AdWords program. That means, the higher the quality score, the lower one has to pay for advertising. Generally speaking, quality score could be largely increased by achieving a high CTR, writing a highly relevant ad text, optimizing the landing page and so on. Nowadays, a lot of people are so good at these techniques that they could actually lower their PPC without sacrificing the advertising effect.

In sum, it’s not surprising that website publishers earn much less from Google AdSense program compared with several years ago. With the increasing competition within the online advertising industry, the continuing thriving Google advertising network, and more and more savvied advertisers, there is not much a website publisher could do to stop the trend. However, it’s not the end of the world. Never forget the equation: AdSense earnings equal Traffic (Or number of visitors) * CTR * PPC. So, here are my suggestions:

o Never sacrifice quality of content or service for the sake of any kind of short-term gain. It’s the very basic that determines your traffic.

o Never stop optimization and promotion work. Otherwise, your traffic or CTR can’t be high

o Always pay attention to new industry. New industry means not only less competition but also less familiar to advertisers, which might lead higher PPC.

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