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Adrank, Ad Auctions & Adsense payments

Posted by Michael Bloch in web marketing (Saturday November 13, 2010 )

AdSense is the publisher side of Google’s Adwords network and provides income to millions of site owners. Google pays publishers a share of what a merchant pays per click. But what determines how much a merchant pays for each click and which ads appear on a publisher’s site?

Aside from merchant specified preferences, Google uses a formula that involves the maximum CPC (Cost Per Click) a merchant has bid and AdRank, which is Adwords quality scoring system. The quality score incorporates an ad’s relevancy, previous performance and the advertiser’s landing page.

These two elements mean that a merchant who bids the highest doesn’t necessarily get the top spot in an Adsense block, or even appear at all.

Here’s an example of how the formula works on a specific keyword or phrase.

Merchant A has bid $2 and has a quality score of 12
Merchant B has bid $3 and has a quality score of 7

The maximum CPC is multiplied by the quality score, so the final score is:

Merchant A = 24
Merchant B = 21

As you can see, while merchant B bid more, the final result shows merchant A the winner. The reasoning behind picking merchant A is that the high quality scores means the ad is more likely to be clicked on and the person who clicks on the ad is going to be more satisfied with where the click takes them.

However, just because merchant A has won, this doesn’t mean the merchant has to pay the maximum CPC he or she has specified – another calculation is used, which is:

Merchant B’s final score divided by Merchant A’s quality score, so using the above example:

21 divided by 7 = $1.75 per click

Finally, the Adsense publisher’s share is calculated. According to revenue share data released by Google earlier this year, AdSense for content publishers earn a 68% revenue share worldwide. AdSense for search partners get a 51% revenue share.


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