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The Parable of the Lemonade Stand: Is AdSense Costing you Money?

Posted By Darren Rowse 14th of December 2009 Adsense, Advertising, Affiliate Programs 0 Comments

A guest post by Kevin from BeginnerBloggerTips.com (with some comments from me below too). Image by Shawnson.

My journey into affiliate marketing.

Before I start, I’d like to make two disclaimers:

  1. I don’t hate google or AdSense—this article isn’t a rant against either.
  2. I recognize that every blog is different—what I’m about to say may not apply to your blog. Regardless, I think you should ask yourself the question I’m presenting here.

Disclaimers finished; let’s get to the point:

The Parable of the Lemonade Stand

42549598_b0780fcbfe.jpgImagine a lemonade stand. The entrepreneurs get the ingredients, start up their business, and have dozens of customers per day. It earns twenty dollars a day. Not bad for a humble lemonade stand, right?

Now, let me throw in a twist: imagine the before-mentioned entrepreneurs are in their 30’s. They own the lot on which the lemonade stand is located. The lot is located along a major highway in a rapidly growing suburban area. All adjacent lots have businesses making thousands of dollars per day. Suddenly our lemonade stand seems rather silly.

This concept is called opportunity cost—the economic consequences of choosing one thing over another. I’m learning about this the hard way — I’ve been making pennies per click when I could have been making dollars per click.

Let me explain in a little more detail. As I’ve mentioned before, strongandfit.net is the first profitable blog I’ve ever had. As my traffic increased, so did my AdSense earnings. A few dollars a day ads up, so I was finally seeing checks come in at the end of every month (I’m new to making money online, so I’m easily amused).

But I started noticing something: a few products in particular kept showing up over and over on my blog (in the AdSense widget). “Wait a minute,” I thought to myself, “these products obviously convert well if someone is willing to spend money promoting them.” I realized I had inadvertently put myself at the bottom of the economic food chain: I was getting paid a few cents per click while someone else was earning commissions on sales produced by these clicks.

I did a little research and started directly advertising these products with affiliate marketing. So far it seems to be paying off—my blog is making more money.

But there’s another benefit: I have complete control over what gets advertised on my blog. It’s turning into a win-win situation: my readers are referred to high quality products, and I earn more in commissions.

I still use AdSense, but I’m devoting more of my prime “real estate” on my blog to affiliate marketing. Maybe you should also consider doing this.

A Note from Darren

Like Kevin says, I don’t have anything against AdSense either. In fact I find that it works quite well on some of my sites. For me the idea of ‘Opportunity Cost’ is a powerful one. For every decision you make to use ANY type ad unit on your blog (whether it is AdSense, some other ad network, an Affiliate product, an ad sold directly to an advertiser, an ad for a product of your own there is a potential opportunity cost of that decision.

The key is to test different options. Kevin has had success in substituting affiliate ads in the place of AdSense, for others affiliate products might not work, but an ad for your own product might. For others it might be about swapping ads to Chitika or another ad network. For others it could monetize better by selling ads directly. For others still it could be better to not have ads at all but to sell yourself on your blog as a consultant.

The key is to test and experiment with different models.

About Darren Rowse
Darren Rowse is the founder and editor of ProBlogger Blog Tips and Digital Photography School. Learn more about him here and connect with him on Twitter, Facebook, Google+ and LinkedIn.
Comments
  1. Hi Kevin,

    I am new to blogging. The link to my blog is:

    http://about-dog-breeds.blogspot.com/

    I am having some issues with adsense. Often the ads are totally irrelevant to my topic. And I dont have really much traffic either. What do you suggest I should do to boost my traffic.

    Best regards,
    Raja Habib

  2. So.. That’s another proof, that we, actually, should track what Adsense is trying to advertise on our websites/blogs :)

  3. Adsense was something that got the world out of the dot com bubble, but these days they are too annoying a lot of reasons contribute to that, some of them include that they don’t release your payments until they touch $100, this is helping them increase there cashflow, but many small publishers have no opportunities to grow. I recently wrote this post which had mentioned how Google Adsense played dirty with publishers. I am not self promoting Darren please do allow this http://dumblittleblogger.blogspot.com/2009/09/google-adsense-playing-dirty-with.html

  4. It’s all about testing. Unfortunately, I am often too lazy to test, especially on the websites I do not have interest in, but I guess some day I might. I recently read a very good post by an affiliate marketer (whom I don’t remember right now).

    He tested adsense, adsense + affiliate offers and only affiliate offers. He found that having only affiliate offers significantly boosted his income. By significantly I mean he doubled is income, it might have been even more.

    So it is definitely worth testing.

  5. Raja,

    Looks like your adsense ads are relevant to your site. There are a few ideas on beginner blogger tips about building traffic, but you have to be patient. It’s taken time to build traffic on all of my blogs.

  6. I think most people miss the point about Adsense: it’s convenience. Every month Google directly deposits money into my checking account. They handle billing, transactions, customer service, etc. And they only take about a 20%-30% cut to do this. I personally think the cut is worth it in many instances, especially when you are starting your blog. Try selling ad space when you have no readers. You can’t.

    As for affiliate programs, why does it have to be either/or. I use both Adsense and affiliate programs on my blog, and it has doubled my revenue from just using Adsense alone.

    Now, when your site gets big enough, it becomes another matter. It may be worth your time to start selling ads directly. But early on, you’ll want to devote every ounce of your time to creating content, and Adsense is your best weapon for that.

  7. Adsense has been around for a long time. I wonder if it will disappear before long as banner ads (for the most part) and pop ups have.

    The great point that you make is about figuring out what works and doing more of it. I wonder how many people could massively increase their blog income by doing a similar analysis!

  8. Kevin,

    Actually I had another blog earlier. And I tried to get traffic through various tips discussed online at various places. But failed to do so. Now I have started this new one. I hope, it will do good.

    Yes, adsense ads are now relevant. I guess that post was a new one, so it was not showing relevant ads earlier.

    Regards,
    Raja Habib,
    http://about-dog-breeds.blogspot.com/

  9. Alan,

    I didn’t say it was “either/or.” What I said was a blogger should consider all options when deciding what kind of ads to run on a particular space on his/her blog.

  10. The whole point of this articles is useless until you grow into a big enough blog with some well created authority for you or your blog. For start-up guys who are unknown in this blogging world, adsense is one of the best motivation for keeep working on the blog.

    Yes you can use direct advertising and affiliate marketingafter that but you are missing a basic point. Google adsense pays money even to a start-up blogger who got a mere traffic of say not even few hundreds.

  11. It might be worth remembering that AdSense adjusts the ads to the local market.

    So while you see ads that are relevant to your country, I see ones on your site that are relevant in mine (Germany).

    If you then swap AdSense on your site to an affiliate that is relevant only to readers in the US, then readers in other country are less likely to click on it than they were on the Google Ads.

    So before taking such a step, I would suggest analysing your web traffic first to see where your visitors come from.

  12. I loved your article. I’ve known about this way of using Adsense without using Adsense for quite a while (I’ve been at it over 3 yrs now) and find it a brilliant strategy. Thanks for sharing it. ;)

  13. Dmytro says: 12/14/2009 at 4:03 am

    Well, it’s nice of you guys to tell us how we’re getting pennies for what could be dollars from AdSense, but for beginner bloggers who have no experience with affiliate advertising, you’re not offering a lot of solutions, alternatives, or explanations on where to go from AdSense or if we should keep using AdSense.

  14. And cheers to Kevin for actually posting the advertising he uses on his blog on his “About Me” page. There are so many blogs out there with affiliate links praising products just to get a commission. It’s nice to see someone being upfront and honest with his readers. This goes a long way when trying to build a community.

  15. I’ve seen my Adsense earnings tumble recently, despite seeing a sharp increase in traffic.

    I’m guessing that I am picking the wrong niches.

  16. Love this post… I’m new to monetizing my site and have often wondered if googleads is the best way to do so. I have just incorporated clickon (?) on one of my sites.

    I’m going to add an option to advertise on them next, then probably start looking into directly approaching companies about advertising on my sites. I still need to get readership up before this becomes a viable option though.

    Thanks for the info… GREAT STUFF

  17. Wow. That has to be one of the most useful money making tips I’ve seen here. I’m going to track what ads show up frequently in adsense over the next few weeks and then use affiliate links to replace them. Really smart insight.

  18. I would like to say that you have to monitor your adsense ads because the ads showing on the post/article should be relevant so that if anyone comes across to your blog should click on it and you can make some handsome money from it.

    And finally affiliate marketing totally depends on the amount of traffic you receive. If you have a huge traffic then you can make more money as compared to google adsense.

    Choosing a good affiliate program is also necessary so that you can make out handsome money.

  19. From my experience I’ve found it better to use adsense, than to use affiliate links that never result in any sale even though it’s within my niche. The few pennies I get from the clicks add up than not getting anything at all at the end of each month. Though I’m aware that selling your own product/service is much better, I’m yet to find a service or product suitable for my readers who are tourism entrepreneurs…I could do with pointers from ProBloggers…

  20. I think that probably the best (honest) option would be not to have any ads on my blog, because it’s specific. But I have to make money from somewhere right?

  21. I found your blog on google and read a few of your other posts. I just added you to my Google News Reader. Keep up the good work. Look forward to reading more from you in the future.

  22. Thanks for the feedback, guys.

    Dan, thanks for the encouragement. One of the issues with using adsense at strongandfit.net was having control over what shows up on my blog.

    I’m more comfortable with affiliate marketing because I can research the products and find out if they are actually worthwhile.

    I think most blog readers understand that bloggers can’t control adsense. Having said that, it’s kind of frustrating to see all the bogus products showing up in my adsense widget.

  23. Awesome article. I want to put adsense on my site soon

  24. I think that having Adsense on your
    website is costing you money
    because there are tons of other
    ways to monetize your traffic

  25. Thank you for sharing such useful information. by the way, are there any ways (aside from having Adsense to our blogs) we could make money online?

  26. Brilliant! I’ve only just dabbled in AdSense. Your observation makes a lot of sense.(cents) Definitely something I am going to keep in mind for future decisions on ad spaces on my blog.

  27. Srini – your comment reflects what I was thinking as having a good reason to implement Adsense!

  28. Darren has already proven that relying on a single income stream is a no-no, that’s why we must diversity and expand it as our blogs grow and mature.

    Though the parable of the lemonade stand is a good example, it actually made me thirsty!

  29. My biggest problem with Adsense is that it’s keyword activated — but often keywords may have no context to your audience. So on my website fanboy.com I’m always seeing ads for FANS, i.e. the things that blow wind on you! I know this isn’t just me as the website Stack Overflow once did an entire podcast rant on the same subject. The problem is that if you have small numbers an ad network may not want to spend time on you. I’ve had mixed results with affiliate programs. The only “silver bullet” that I see is to build your page views up and then worry about revenue.

  30. Michael,

    I’ve had some of the same problems. As mentioned, I’ve also seen adsense show products which I specifically label as scams on strongandfit.net.

    You bring up another good point–you are not going to earn if you are not getting some decent traffic and their are no “silver bullets.” I’m still not earning huge profits from blogging, but affiliate marketing is a better earner for Strongandfit.net.

  31. Great post. It’s definitely different for different types of blogs, and different traffic amounts. I get around 50,000 visits per month and do way better with Adsense at the moment. Affiliates perform well for me within a post, but not in a banner ad.

    In my experience tracking affiliate ads vs Adsense, I would earn maybe $1 or $2 per day with affiliate banner ads, but $10-20 with Adsense.

    My favorite thing about Adsense is the fact that it rotates automatically and puts up fresh ads. I got tired of trying to rotate affiliates to keep them “fresh” but also give them enough time to perform.

  32. Thank you for sharing such useful information. by the way, are there any ways (aside from having Adsense to our blogs) we could make money online?

  33. It’s all a matter of testing to determine which model brings in the most profit. Testing is the key.

  34. A VERY informative article! As you can tell from my name I’m acquainted with the Adsense program. I still think that it is a very legitimate way to be able to earn money online BUT I agree that it shouldn’t be one’s only source of online revenue because there are other ways that you can include to be able to make even more money online.

    I am curious – maybe I didn’t see it – but you mentioned that you took note of those that advertise more frequently and you used affiliate ads to promote them. How did you do that? How can you tell whether or not the popular advertisers have an affiliate link that you can use?

  35. I have just removed adsense from my blog.

    http://about-dog-breeds.blogspot.com/

    I guess its not good to put it in, in the beginning. Many directories are rejecting my blog, as they think, its just a commercial blog. So I have removed the adsense for the time being. Once my blog gets listed in some of them, I’ll put it back in.

    What do you think about this?

  36. What i get from this article is we should always try new way to optimize our earn.

  37. Adsense Consultant,

    Well, one example would be the Truth About Abs. I saw that one, so I did a little research. I learned that it was a good product and one I could market through clickbank.

  38. I recently came accross your blog and have been reading along. I thought I would leave my first comment. Nice blog. I will keep visiting this blog very often.

  39. Adsense really costs too much money now and it costs more and more in the future! But some one could also make big money by it. In fact, if you want to make big money, you must first have a lot of money.

  40. Hi kevin,good info..
    I hav one question,I have a new blog http://donnyien.com/ but not 100% in english. Can i put google ads on my blog?

    Need answer,
    Donnyien

  41. Kevin, this is what I call perfect timing! :-) Basically I came up to the same conclusions as you couple of weeks ago, after I finally took the time ( and this is all my fault I didn’t do earlier) to take a closer look at Amazon Associates. I’ve been working hard on my blog for 2 years, but I might say that I am new at using the monetizing programs. AdSense is all right as you say to have on the side, but at times it’s really annoying that you can “promote” products on your site you don’t actually approve of! I am not making huge sales on my site overall, but I’ve noticed the difference since I earned from Amazon in 2 hours what I’ve earned with AdSense in 2 years.
    For me is like this- you can do it the easy(lazy) way when you delegate the work to someone who is going to “work” for you and get the SSI ( stead-slow-income) as I call it or you can take the time, do your homework, put some sweat in it and try for the better money.
    Sure, it wouldn’t work every time, it would take MORE time, but if it works, it would pay way better than AdSense.
    So, your job is to make it work. And that takes some work…and reading. You can have both of course too.

    We have a saying in Bulgaria that is basically like this” The wolf’s belly is full because he does what need to be done alone”. If you count on someone to do your work for you, well, it would be easier at the moment but you’ll get less, because no one has your better interest at hand than you alone.
    And after all, if you are a blogger who wouldn’t like to take risks too much, that’s the best option. But if you take up on some risk, as you say it’s best to try different things and see what works for you.
    I’m not scared to work for what I want, so why should I waste my time and not use what I’ve created- the trust in my readers! That’s something I’ve worked hard for, why should I let someone use it and earn money on my hard work? As someone of the other people who left comments said, this at times can be even harmful to the trust I build in my readers ( promoting products I don’t approve of)
    Things aren’t always what they seem and if you are not careful, what is good for you today, might not be so tomorrow.
    Very good post, thank you for it!

  42. I as well just made some adjustments to my adsense ads. Blogging for 6 years and just now starting to get monthly income.

    One time I removed my adsense from one of my blogs and my bounce rate improved big time. Why? I have no control over the ads and my URL had the word “God” in it.

    This was causing Google to place large ads of Jesus, which was causing people to bounce right out, even though the blog was not about Jesus!
    Peace

  43. Funny you should mention this. I have been seeing the exact same Adsense ads on my forum. I was thinking that maybe my readers would not click on it because they have seen it already a million times. Great tip to actually to sell the products that people are advertising with Adsense yourself. I am on it!

  44. Donny,

    Yes, google has ads for several languages.

    Annie,
    Affiliate marketing does indeed take more work. But like you said, the rewards are there.

    MrCyberSmart

    I removed adsense from my devotional blog (KuyaKevin.com) because all kinds of whacko religious messages were appearing.

    Like I said, I’m not anti-adsense (I still use it). But each blogger should consider other options.

  45. One more thing. On another site I decided to use Adsense and targeted affiliate programs. I became a reseller for a company offering the exact services that would appeal to my viewers. Also, the services were recurring which was nice. I make more with them than I did with Adsense alone. Plus I still have Adsense ads working there too. An Adsense representative actually contacted me and gave me layout advice which surprised me.

    Something else to consider is not putting all your eggs in one basket. Google is very cryptic and skittish. They nuke accounts left and right and never really tell people why.
    Just following the rules is not always enough. Both Adwords and Adsense. So Adsense is part of my strategy but I do not rely completely on Google for anything.

  46. Great article, very helpful! Continue sharing your brilliant ideas! :)

  47. Adsense has been around for a long time. I wonder if it will disappear before long as banner ads (for the most part) and pop ups have.

    The great point that you make is about figuring out what works and doing more of it. I wonder how many people could massively increase their blog income by doing a similar analysis!

  48. I agree. The testing is the key.

  49. @Matthew Meyer “They nuke accounts left and right and never really tell people why.”

    Yes they do indeed. I have read so many things on people being owed substantial amounts of money, and then they delete their account with no explanation.

    Do not put all the eggs in one basket is a good rule to follow. I love Google in many ways, and then I get worried about the monopoly that they have. If a person was to get on the wrong side of Google- lights out… that is too much power!

  50. @MrCyberSmart My philosophy with Google is to use them but very conservatively and not to rely too much on them. My Adsense and Adwords strategies are very conservative. I try to follow their rules and then pull back a little bit. Still I do not kid myself. I see how they operate. They can change their rules, nuke your account, and never tell you exactly why. I have read this on too many forums. There also is almost no point in guessing what went wrong. They just send pre made emails with a list of possibilities. It must be nice to be that powerful! I would hope I would be nicer though.

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