Thursday, July 17, 2008

REVENUE SHARING explained

Nowadays, most websites use Pay Per Click programs like AdSense as a way to pay for the services they provide. Some others went further and got the great idea of letting the members that keep the website alive benefit from this revenue stream too. This is called Revenue Sharing.
How does Revenue Sharing work?
 

Revenue sharing is typically used in "community websites". A community website is a website that has a loyal readership regularly updating and renewing the website's content. Discussion boards or Forums are the best example to explain how revenue sharing works, as they are the most common form of community websites.

As a registered member of a forum, you get the right to access all the services it offers (ask for help, help others, send private messages, search the forum.). 

To motivate their members, forum owners used to thank them by different flattering techniques (become a moderator, have your name on the best members' list, become known as an authority in a given area.) but when AdSense became a popular monetisation system used by almost every Internet advanced user (typically the people participating in forums), some clever forum owners thought the motivation would be even greater if the best members could benefit financially from their participation in the forum. Revenue Sharing was born.

Even though the terms may vary from a revenue sharing forum to another, the principle is the same: Every forum member is asked to give his AdSense publisher ID then, after fulfilling some "active member conditions", a percentage of the ads displayed on the forum would be for him i.e. displayed with his AdSense Publisher ID. If the advertising gets clicked, the member earns money directly in his AdSense account. This is called Revenue Sharing because the forum owner shares his website's earnings by sharing his advertising space.

To have your ads shown, you may be asked to reach a certain number of posts, start popular threads, be a member for a defined period of time.

As you can see, this a "performance based" strategy that ultimately benefits both the forum owner and his community: the forum owner gets loyal and active members making his content richer and up to date which will end up increasing his website's earnings and the forum members get a share of the money they helped make in addition to the help and services they get from the forum. This is a great win-win situation.
Some revenue sharing websites: 

The fact that Revenue Sharing is a win-win strategy helped make it very popular among internet users and many websites are now using it. We have listed below - and commented on - some popular revenue sharing websites to help you make your choice if you want to get started making money from revenue sharing. We will keep updating the list as we discover new interesting websites. 

However, we would like you to know you shouldn't expect to make much money out of revenue sharing as it will hardly ever earn you more than a few dollars a month (we have tried it!). 
digitalPoint forums

DP Forums are among the most popular and usefull webmaster forums I know on the net. After registering and posting at least 50 times, you are allowed to enter you AdSense ID and get started sharing revenue.
For threads you start, your AdSense client ID will be used 50% of the time when the thread is viewed as a thread. 
Your AdSense client ID will be used 50% of the time when the thread is viewed by post and you made the post of course.

As you can see, the only way you can have your ads shown is by starting threads. In about two weeks, I participated normally (two or three post a day) and two or three threads started. Here are the results : 322 impressions and 2 clicks earning a huge 25 cents! I also got some CPM impressions which got me 2 additional cents.

ADSENSE ARBITRAGE

AdSense arbitrage is a simple technique that has been imagined by some internet "pirates" to automate the process of making money online. They use pay per click programs like adwords to generate traffic on a given website, then they convert the traffic into money using advertising programs like AdSense. This is of course against google TOS. 
 

As you can imagine, the cheaper the traffic is, the better. That is why those unusual advertisers try to target the least competitive keywords even with low traffic. 

The traffic is then directed towards an MFA (Made For AdSense) website. Of course, the website should be optimized to generate a high CTR and a high RPC making the eCPM really good and the whole business profitable. 
Let's see it in action!
Traffic: 

We have chosen to build a website on web hosting so we have to find keywords related to hosting (a competitive area) that are cheap to generate decent targetted traffic. We have chosen the following words (some typos and some other rare keywords):
Keyword  
Average CPC  
Traffic  
Monthly Budget 

cheep hosting  
0,41  
2810  
1152,1 

perl hosting  
0,19  
1100  
209 

webb hosting  
0,22  
3351  
737,22 

celeron server  
0,33  
590  
194,7 

AMD server  
0,24  
102  
24,48 

secure web hosting  
0,28  
3215  
900,2 

TOTALS  
   
11168  
3217,7 


However, some arbitragers don't mind using irrelevant cheap keywords or other PPC advertising networks like Yahoo Publisher Network, Miva... to get cheap traffic even if it is not targetted. 
The website: 

We have built a one page website with no outgoing links. We have placed a paragraph about web hosting stuffed with high value keywords related to hosting (affordable web hosting, cheap web hosting, free web hosting.) followed by two large rectangles of adsense ad units. 

An additional link unit is placed on the right hand side of the page instead of a menu.
Revenue: 

To be profitable the website should generate a 30% CTR (possible given how we build it) and an average Revenue Per Click (RPC) around $1. Our profit will be as follows:

Profit = Revenue - Expanses 

Profit = (11168 * 0.3 * 1) - 3218 

Profit = 3350 - 3218 = $132

So we have managed to make $132 dollars doing almost nothing!
A shaky business model
As you can infer, this business model is really shaky and not sustainable as the least change in the business model parameters (CPC, CTR and RPC) can lead to some serious losses. In addition, such practices are actively fought by Google and all AdSense publishers using them are banned.

Double your adsense earnings showing fewer ads

YES it is actually possible to dramatically increase your revenue from Adsense simply by reducing the number of ad units you show in every page. In fact, most AdSense publishers think (and the AdSense team also tells them) that showing more ads will increase their adsense monthly income. This is unfortunately hardly ever true! 
 

Before you read on, we strongly recommend that you carefully read our article about the adsense pricing model since the strategy we will be discussing is mainly based on taking advantage of the adsense pricing model.

As you probably know, there are three main ways to increase adsense income on a website: 

• more traffic 

• higher CTR 

• higher CPC 

The strategy we are to reveal aims at getting a consistently higher CPC. 
Double adsense earnings showing fewer ads: A case study 

Let's consider the following case: you run a website with some traffic and three ad units (Top banner, Right Hand Skyscraper and a half banner at the bottom) and you make $ 130 a month. 

Let's see how you could double your income by showing fewer ad units. Here are some details about your website: 

• Traffic: 9.000 visits and 25.000 pages viewed in average every month. 

• AdSense Stats: 
Ad unit  
CTR  
CPC ($)  
Revenue ($) 

Top banner  
1,00%  
0.23 
57,5 

Skyscraper  
1,20%  
0.11 
33 

Half banner  
4,00%  
0.04 
40 


Unless you have understood the adsense pricing model, you may be wondering why CPC is so different from one ad unit to another. Anyway, this is normal since the ad that gets the higher paying ads is the one that first appears on the HTML code (the Top banner) and is followed by the second one (Skyscraper) then comes the third (Half banner).

Let's now cut down the number of our ad units keeping only the Bottom Half banner. This means the half banner shows first on the HTML and so gets the two best paying ads. Since it is the first ad unit, it should have the same CPC the top banner used to have. Moreover, a banner shows 4 ads where a half banner shows only 2. This will result in a considerably higher average CPC for the half banner (due to more competition). CTR will at least stay at 4% since we kept the same placement, same colours. but could also increase to something like 5% because your advertising will be less intrusive. 

Let's now see how much money you will be making with no change in your traffic stats:
Scenario  
CTR  
CPC  
Revenue 

1  
4,00%  
0.23  
230 

2  
4,00%  
0.30  
300 

3  
4,50%  
0.23  
259 

4  
4,50%  
0.30  
338 


As you can read on the chart you could easily make $ 230 in the most pessimistic scenario while an optimistic scenario could yield more than $ 300!!! with no change to your traffic and a better reader experience.
Can I use it on my website? 

Yes most adsense publishers can use it. However, there are some preliminary conditions to getting the most out of it:

• If you are in a low paying market (like arcad and games related websites) where CPC is around 5 cents no matter how high your ad is in the HTML code, don't use this strategy as it won't do much for you. On the opposite, if you are in a high paying niche this strategy could work great for you. 

• You also need an ad unit with high CTR, compared to the other units on the same page, while having a lower CPC. The bigger the differences are, the more you could increase your revenue. 

If you can fulfil the two above conditions, then hurry up and remove those ads that keep you from making real money. 
Want more money?

OK! Now that you have reduced the advertising pressure on your visitors, you can choose to sit down and watch increased loyalty from your readers, more links... (long term results) or choose to get even more money now (short term) by adding ads to the space you have saved.

As you know, link units and referral products are perfect for that since they do not compete with ad units (so you can add them with no risk to the above strategy). 

Of course you can use other advertising programs instead of adsense but we won't discuss that as this is a "make money with adsense" website!!

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