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

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.

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Comments

  1. Jon says:

    I plan on doing the same… a bit of adsense, but mainly affiliate sales using discounted products that my readers actually benefit from!

  2. David Walker says:

    Thanks for the question, Kevin. Is there anyone out there who’s never run a lemonade stand? Fond memories of our lemonade..

    I think the most important thing is to monitor the site and ads and see which way to go. I sell myself as a consultant and don’t have any ads at all but if I ever do, then I think I’d go for affiliate marketing over the AdSense.. Makes dollar sense.

  3. Steve says:

    Hi Darren & fellow bloggers,

    this has been a very interesting read indeed, however most of the commenters seem to have missed one crucial factor in all of this, TRAFFIC !

    Who or what you advertise on your blog has to be a secondary consideration surely, because without the all important traffic you aint going to get the clicks.

    I remember back to April 1st this year, the big conflicker scare, my visitors to one of my other sites for that one day was 2,700 as compared to a normal 85/day. On this one day alone I earned over $75 with adsense where usually it was nearer $3. The point is that earning from your blog or website is purely a numbers game, a law of averages! Get enough visitors hit your site and you can & will sell literally anything.

    Add to this the fact that most affiliate programs pay far more than Google’s Adsense and it becomes very clear why people like yourself promote affiliate marketing over adsense. But as so many have rightly pointed out, adsense is ideal for new bloggers not just because of the steady trickle of a few bucks, but also for the fact that whilst checking how much or how little one has earned, you will also often get notified of any site errors, I don’t know of any affiliate program that actually does that !

    Great Blog Keep Up The Good Work ;-)

  4. Seth W says:

    Converting your readers into profits is not only important but easier than we think.

    The key is trying new things and sticking with what works best. Soon your good ways to make money can be opted for better ways and then best.

  5. I have read so often that Adsense is a minor money maker, but this is this first time I’ve ever read how to use Adsense to boost the income flow.

    Thanks for this!

  6. Blommi says:

    Adsense simply doesn’t work for my blog. I get almost all public service ads. I have basically held off on monetizing the blog, until I have sufficient traffic to warrant ad sales, reviews or one of the niche targeted ad services.

  7. I am currently earning a little from adsense, not a wage. I know i wont stop tikll i make my goal of 1000 dollars daily. People laugh, but i will get there
    One way or another

  8. Magnetic says:

    I don’t use Adsense much any more. I have one site about The The Charter For Compassion and I get banner ads for Scientology on it. I hate that as it looks as if I approve of it. Unfortunately that is a Squidoo site so I can’t delete the ads.

    The other thing that makes irrelevant ads appear is when the advertise uses every possible keyword so it appears everywhere. A good recent example of this is the diet advert for “get rid of belly fat”. I am sure you have seen it too,

  9. scott says:

    Interesting!

    Thank you for the helpful advice, really helpful for my new blog!

  10. scott says:

    Interesting!

    Thank you for the helpful advice, really helpful for my new blog!

    http://linksharedirect.blogspot.com

  11. Paul Hassing says:

    Many thanks for the learnings, guys. I appreciate your frank, dispassionate discussion of this tricky topic. Best regards, P. :)

  12. Yes it’s true that some blogs don’t earn much using adsense but excels in other kind of money making scheme like affiliate programs.

  13. Girish says:

    Kevin,
    I agree with you , but with Affiliate marketing the main challenge is to find a right affiliate marketing website where we can sign-in.
    Take this example
    I write about christmas gift at
    http://dotgiri.com/2009/12/10/11-christmas-gift-ideas-and-tips-which-make-you-feel-great/

    and Google is placing appropriate advertisements on that post but if I try myself I may not be able to find these clients who is interested in advertising and also most of them may not have a affiliate marketing system in place which track the sales.

    in the above post calyxflowers advertisement is displayed by google but if I contact them they may not be ready to advertise with me or even affiliate market with me since they don’t have a affiliate marketing setup with them.

    what do you think?

  14. MichaelR says:

    Very good post. This is the first time I’ve heard about opportunity cost but it defined here very clearly. I think you can apply this too to offline business and you can choose wisely on your decisions.

  15. Chris Palmer says:

    To be honest, anything that messes with my design and the purpose of my blog (or websites for that matter) I get rid of it. Adsense is something that always annoyed me about websites.

    In fact, I see a website as less credible if they have adsense. It tells me, ‘These guys can’t cut it with their own products or ideas, so they have to turn to making really, really small amounts of money in order to make a living online’.

    Of course, this probably isn’t a fair assumption, but at the same time, it’s how I feel. I say this with all respect to those who use Adsense. Just letting you know there are those out there that really frown upon it.

    At the end of the day, does it sell what YOU’RE offering, even if you aren’t taking money? In other words, who’s ideas are getting sold?

  16. Electric Ego says:

    Adsense is quite targeted advertising solution. Google ensures that they serve relevant ads for their customers as that means higher click-through rate & more profit to both parties and they have been constantly working on to developing the Technology. Agree, some sites perform better with affiliate marketing than adsense, but then there are sites that generate thousands of dollars with adsense only. Thinking the sites that employ adsense are any less credible would be biased.

  17. scheng1 says:

    Funny day for me! I keep on seeing economic concept in whatever I read.
    The thriller I’m reading right now talks about maximising utility, this blog post talks about opportunity cost. Another blog that I read earlier talk about demand and supply in China’s real estate market.

  18. It may be an intelligent step to reach the adword advertisers directly. However, AdSense ads are geographically targeted. Thus what Darren may see in Australia may not be what most of the US readers see. So you may actually end up posting irrelevant ads.

  19. I have despised sites that are clogged up for adsense for quite some time.

    I couldnt find nothing more annoying that having to scroll down below the fold to actually find useful content.

    However, my blog has been converted into a social network and my business model is changing.

    Seeing as I have members part of a community, marketing my own affiliate products can appear to be more focused on me rather than the community. Adsense (my first test) or something similar seems to be the way to go.

    I am now starting to use adsense to ‘test’ the adspace.

    I have found quite a few bloggers who use it tactfully so will keep on testing and see how it goes.

    test test test! :)

  20. almost more than half of the tips work for me ! yippy, i had an increase of 2000 visitors in two days !

  21. Adsense works on some sites very well whereas on others it leaves you dry.

    One needs to work out his own model of generating revenue.

    I have no complaints against Adsense. When I make my site better, I make more money per clicks.

    One thing, not all affiliate products perform that well.

    One needs to experiment and decide.

  22. erick says:

    Now THAT was a good article. It’s interesting to note that my generic, key word rich domain names have done extremely well as Adsense sites, averaging almost a buck a click, but the “niche” sites have been making more money since i moved them to whypark.com. I expect that I’ll eventually settle on another monetization technique, since whypark’s two click process leaves a lot to be desired, but it illustrates Adsense’s strenghts and weaknesses well. Thanks for the article-was definitely worth reading.

  23. Inglid says:

    Hello Darren, because you do not use google adsense on this blog?

  24. Burke Dooney says:

    I always wonder this especially when your getting .10 a click. I really though about not putting adsense on some of my sites and just put something else there instead.

  25. You have to build up the viewership first before ou can go this route. Google adsense makes sense for the upstart blogs out there.

  26. PaidSurveys says:

    I don’t understand why Darren has not used Google Adsense on this blog.

  27. Adsense is by far the best program out there. But the problem is that you need to generate about 100 clicks a day to be making any real money. I generate is i work hard about 30 clicks a day. So im far from the 100 click mark