Google AdWords-AdSense Block Diagram

Adwords Adsense System

Google AdWords-AdSense Block Diagram

HERE is a block diagram illustrating the relationship between Google AdWords, and the Google AdSense PPC program.
The searcher is shown in Green (top).
Google is shown in Blue.
The ads are Yellow.
Secret Sauce is shown in Grey.
Adwords customers shown in Violet (left).
The web publisher is shown in Pink (right).
In no way, is this meant to be a comprehensive description. Only those aspects are shown which relate to the inter-relationships.

Noise and Supposition

2 Separate Bots
Do not confuse Googlebot (search) with the Mediapartners bot (AdSense).
Googlebot is responsible for your SERP position.
Mediapartners bot is responsible for ads served to you.

Secret Sauce -
Only Google knows what is going on in the 4 boxes labeled "algo". Each Google algorithm is highly proprietary, and is constantly being tuned for profitability - for Google, the advertisers, and the publishers. What you thought you knew yesterday, can be substantially altered today. What is required is an open mind, diligent reading of Google webmaster forums, and personal experimentation.

Google has multiple chefs, each of which favors different ingredients, based upon trends discovered from continuing operations feedback. The chefs may not agree to the solutions required to fix a given problem. New problems will always arise. The algos will continue to change frequently.

Don't be surprised by new spices and flavors.

AdWords Advertiser Cost
Free market - competition determined - higher bids for popular terms

Advertiser sets the budget - minimum $ amount per month.
Advertiser sets the maximum $ amount spent daily.

Some AdWords advertisers frequently run two or more campaigns simultaneously -
---> Higher bids for the Search Results (Google dollars), and
---> Lower bids for the Content Network (Publisher dollars).

Google AdWords customers usually bid far less per click on the content network than they bid for Google Searcher clicks, since the perception is that clicks from content pages are worth less than clicks from the Google Search page.

However, SOME AdWords advertisers have opted to leave the "content switch" on, because they have gotten excellent results - high traffic and high conversions.

Guess-o-matic
I sure don't have all the answers, and my assumptions are frequently waay off. But it sure is fun trying to figure it all out. It is an undefined puzzle, which the curious (perpetual student) simply cannot ignore. (Yaa, I know . . . I am curious in more ways than one.)

AdSense Publisher Payout

The "Payout algo" establishes "Traffic Acquisition Costs", and ultimately Adsense Program success.
If G pays out too much, they lose money.
If G pays out too little, publisher quality will decline, and publishers will seek other options.

The lowest acceptable AdWords bid is $0.05 -
The lowest AdSense payout reported is $0.01 -
Therefore, at the low end, the minimun AdSense payout is AT LEAST as low as 20%.

Premium Partners receive a much higher proportion of the ad money bid - 80%? Some have mentioned that Google even has "loss-leaders", which would suggest 100% payout.
Does Google reward higher Click-Through Rates (CTR), by paying out higher Earnings Per Click (EPC)? Shouldn't they? Wouldn't they? The ads would be sold off at a faster rate, perhaps eliciting more advertiser dollars.

If this is true, AdSense publishers would do well to remove AdSense ads that perform poorly, in order to be paid more per click.

I found this AdSense on Non-performing Pages at Webmaster World.

I found this Higher CTR = Higher EPC discussion at Webmaster World.

I found this Payout Based on Natural Rankings at DigitalPoint.

Or maybe it's just dollar volume, or click volume, period. After all, Premium partners (20 million views per month) are paid the highest %. And their CTR only has to be a minimum of 0.5%.

.
TODAY'S
AdSense Payout Theory

1. Bid amount is most important - first, the money must be there.

2. The V factor - Google's perceived Value of the page -
     ---> Analyze SERP position for value to AdWords advertiser
     ---> Analyze Click-Thru-Rate for value to AdWords advertiser

3. Impressions - Raw volume - Increase traffic

4. High CTR = High Value to Google and the AdWords customer
     (Now you are ready for high-paying TOP AD delivery).

5. Premium (high-volume) AdWords customers get special deals.

High SERP + high volume + high CTR = Gravy.
The gravy goes to the top performers, in a merit-based system.
The way that it SHOULD work, right?
.

Definitions	Formulas
CPM - Cost Per Thousand	An Ad system in which the advertiser pays a fixed amount for each 1000 Impressions. CPM = $xx
PPC - Pay Per Click	An Ad system in which the advertiser pays a fixed amount for each ad that is clicked on - Google AdWords Ad position is determined by customer bid. Relative AdWords CPM = 1000 x CTR x EPC
AU - Ad Unit	A block containing from 1 to 5 AdWords Ads.
IMP_T - Impressions	Quality of Ad Units delivered by Google IMP_T = f_Pop x (1 ÷ SERP#) x Inventory (Month end, month beginning variations)
C_T - Click Total for period	C_T = IMP_T x CTR = Total Valid Clicks
E_T - Earnings Total for period	E_T = EPC x C_T = Total Earnings
CTR - Click-Through-Rate	CTR = IMP_T ÷ C_T
EPC - Earnings per Click	EPC = E_T ÷ C_T
EPM - Earnings Per Thousand IMP	EPM = 1000 x CTR x EPC
P_P - Page Payout	P_P = IMP x CTR x EPC
SERP# - Search Engine Result Position	What position in the SERPs is your page, for the target search term? NOW!
f_Pop = Popularity factor of Search Term (This will determine competition.)	Determined by - ---> Inherent Demand ---> Cultural Trends ---> News Events ---> Geolocation ---> Branding ---> Season ---> Gender ---> Age
Disclaimer - This definition table needs some more work.	All the above refer to ONE SPECIFIC WEBPAGE and ONE SPECIFIC SEARCH TERM.
I made this Adwords-Adsense block diagram to save myself some time, and help me to understand the relationship between the two Google advertising programs. Although much of the above is speculation, I believe that this page is helpful to the webmaster community, by clarifying the complex relationships involved. top of page

Disclaimer

NOT A Google, Inc. Site

In no way, did this data come directly from Google, Inc.
This page consists of a compilation of public information, commonly available on the internet, at multiple sites, as well as public webmaster forums, and simple manual tests.

The opinions stated above are merely the personal opinions of the author.
I am not privy to any inside information.
This information is continually changing, and may not be relevant when you read it.
Although the author makes every effort to verify the information on this page, no information on this page is guaranteed to be correct, and any data contained herein may be erroneous.

Google Related Summaries
AdWords-AdSense Block Diagram	Google Data Centers List	Google Top-Paying Adwords
Google AdSense Penalties	Google E-Bay Tasteless Ads	Google Webmaster Forums Review
Google AdSense Stop Words	Google SEO Ranking Factors

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This Google Adwords-AdSense Chart was last updated on 2007-05-10.