Saw this online, felt i needed to share.

Read through to find out all you ever need to know about ad networks and how they can make money with them.


Ads 101: How to Make Money Using Ad Networks


Table of Contents

1. How Ad Networks Operate
2. What Is “Fill Rate” and Why Should You Care?
3. Ad Network Jargon
4. Why Fill Rate Is Important
5. So How Much Money Can You Make?
6. Google Adsense
7. Adsense Minimum Requirements
8. Where Should You Place the Ads?
9. Standard Ad Sizes
10. How to Place Ads on Your Blog
11. How to Filter “Bad” Ads
12. Terms and Conditions
13. Premium Ad Networks
14. Setting Up a Daisy Chain
15. A Brilliant Idea?
16. What About Ad Servers Like DFP?
17. Next Steps

1. How Ad Networks Operate

What happens behind the scenes is actually complex, but the important thing to understand is that the ad network will provide you with an ad tag (which is just some lines of code) that you place on your site, say on the sidebar. They will then run ads on your site, track everything, and pay you. You’ll have a dashboard to log into so you can see what’s going on, change your account settings, and so on.

You can think of your ad zones as little TV sets on your blog.

The locations where you place the ads are called ad zones, and you can think about them like TVs in a sports bar. You set up the TVs and provide the captive audience, while the ad network provides the programming and then pays you for showing it to your audience.

With ad networks, instead of you having to find every single advertiser, collect payment, and traffic the ads, the network handles it all and pays you one check a month. But they don’t work with just a few advertisers per month, they work with hundreds or even thousands of advertisers and then distribute their campaigns across many different publishers (publishers = bloggers).

Another difference is that they sell ads based on impressions (one impression is the ad loading on one person’s browser as they read the web page) as opposed to showing an ad constantly for a period of time, as many bloggers do when selling ads directly. For all the work they do, the ad networks take a cut (32% in the case of Adsense). It’s a fee I am happy to pay for.

2. What Is “Fill Rate” and Why Should You Care?

Every time a reader loads your web page, the ad network gets called with a request to run an ad. If the network doesn’t actually have an ad to show to that particular reader at that time, no ad will show (the ad will be blank), and you won’t make your tiny fraction of a cent on that impression. The percentage of ads actually served (impressions) divided by ad requests is called fill rate, and depending on the ad network, time of year, and other variables, your fill rate might range from say 15% to 100%. For example, fill rate is usually lowest in January (see this post for why).

To calculate fill rate, take the number of ad requests and divide by the number of ad impressions. Let’s say you have two ads in the sidebar:

The top one gets 200 impressions in a day, but reports show only 150 ads were served. The fill rate is 75% for that ad zone (150/200=0.75).The lower ad zone gets 190 impressions in a day (since it’s lower on the page), but reports show only 100 ads were served. The fill rate is 53% for that ad zone (100/190=0.53).

The ad network’s dashboard for your account will typically show all of this info as well as the calculated fill rate for you. I should also point out that you never want a blank ad to show (since it’s lost opportunity and looks bad), so networks allow you to set up backup ads. These can be house ads you create yourself (perhaps pointing to a product sales page, affiliate link, or well monetized post) or additional ad networks.

3. Ad Network Jargon

I’ve already defined some of these terms, but here is a quick reference section. These will be important for general understanding as well as deciphering reports from ad networks.

Ad Unit – An ad unit is Google’s terminology for a set of ads displayed as a result of one piece AdSense or DFP (see end of article) ad code.

Ad Zone – Similar to an ad unit, this is a more generic term that represents all the ads that run in a particular location on your website resulting from a specific ad code. For example, you may have an ad zone in the header, one in the right sidebar, and one at the bottom of the web page.

Ad Tag / Ad Code – This is the actual code that is provided by the ad network and that you place on your site to get ads to show up.

Pageview – A view of a page on your website. Note a reader doesn’t have to view the entire page for a pageview to be recorded.

Impression – An ad loading on one person’s browser as they view the webpage. You will get higher impressions on ads near the top of the page since readers don’t have to scroll down to see them. Conversely, ads at the bottom of the page will receive fewer impressions than those at the top. This is why ad impressions don’t always equal pageviews. To drive the point home, if you had say three ads per page and every reader scrolled down far enough to see every ad, then your total ad impressions would be 3x your pageviews. But obviously that will never happen, so that number might be more like 2.5 in reality.

CPM – Stands for “cost per milli” and represents how much an advertiser would pay you for 1,000 impressions of their ad. For example, if an ad gets 10,000 impressions in a month with a $2 CPM, you’d earn $20.

Fill Rate – The percentage of ads actually served (impressions) divided by ad requests. For example, if an ad zone is viewed 10,000 times but only 4,000 ads are served, you have a 40% fill rate.

CPC – Stands for “cost per click.” Some ads only pay if someone actually clicks on them. For example, an ad might pay $2.00 per click, but keep in mind that the ad may have to be shown 1,000 times to garner a single click. In order to compare performance to standard display ads (sold on a CPM basis), the earnings are often shown as eCPM.

CTR – Stands for “click through rate”, and equals the number of times an ad is clicked ÷ the number of times it is served. Click through rates of 0.1% are common.

eCPM – Stands for “effective cost per milli.” eCPM = ad zone revenue ÷ impressions x 1,000. As mentioned above, eCPM offers a way to compare performance of CPC and CPM ads. When working with ads sold on a CPM basis, it also takes into account fill rate (basically eCPM = CPM x fill rate in this case).

RPM – RPM stand for “revenue per milli” and represents the total revenue per thousand pageviews (RPM = page revenue ÷ pageviews x 1,000). For example, if you have only one ad zone on your site and it earns $1 CPM, your RPM would also be $1. But if you had three ad zones each earning $1 CPM, your RPM would be $3. RPM is especially useful when working with multiple networks and evaluating optimization efforts since it shows you the big picture.

Creative – The image associated with an ad.

Backup Ad Tag – Just like it sounds…if a network doesn’t have an ad to show, they will call whatever ad code you have set up as a backup.

House Ad – This is one of your ads that you can specify as a backup if a network has no ad to show. It will consist of a creative and click through URL. Perhaps you want to promote a product or service you sell, a popular post, a heavily monetized page, or an affiliate product.

4. Why Fill Rate Is Important

Fill rate is important because revenue = fill rate x CPM x impressions ÷ 1,000 (or stated another way, revenue = eCPM x impressions÷ 1,000). If your fill rate is low, you likely aren’t earning that much. Let’s look at two examples to illustrate my point. Say you get 10,000 impressions in a month:

If using Adsense at say $1 CPM and 100% fill rate, you’d make $10 since 100% x $1 x 10,000 ÷ 1,000 = $10.Now let’s say you are working with a network that offers $5 CPM (which would be outstanding, at least for our food niche) and 20% fill rate. You’d still only make $10 since 20% x $5 x 10,000 ÷ 1,000 = $10.

Kind of makes you feel deflated, no? This shows why fill rate (and consequently, eCPM, not just CPM) is important to consider when comparing ad network performance.

5. So How Much Money Can You Make?

It takes traffic to make money with ad networks, and perhaps it’s not worth your effort to set one up unless you have around 10,000 page views a month or more. To make my point, let’s look at a hypothetical situation. Say you get 10k pageviews a month and have Adsense (assuming 100% fill rate) set up with the maximum 3 ad zones and are earning $1.00 CPM (per ad zone). 100% fill x $1 CPM x 10,000 impressions ÷ 1,000 x 3 ad zones = $30 / month. It’s a start, and earning a little money can be very encouraging. However, I want to set realistic expectations here.

If you take the above numbers and increase traffic to say 500k pageviews, now you are seeing more like $1,500 a month. I am actually working on a blog income calculator that will estimate income from ad networks (as well as other standard revenue streams) for you. I think it will be quite helpful and fun to play with. By the way, all the CPM numbers I mention in this post are net to you (after the revenue split with the ad network).

6. Google Adsense

OK here is the deal with Adsense and why I recommend it as the first ad network you apply for:

It’s relatively easy to get approved.They have almost 100% fill rate. Fantastic!They offer sophisticated tracking as well as ad filtering and blocking options (for example, we block food and pharma ads on my wife’s site since they are contrary to our mission of cutting out processed foods).They match ads based on your readers’ search habits and the topics discussed on your website, therefore increasing engagement and CPM rates (more $ to you).They provide a 68% revenue share (net to you), which is pretty good.

7. Adsense Minimum Requirements

Honestly we started monetizing my wife’s sitewaaaay too late (her site was 1.5 years old and seeing about 500,000 page views a month at the time!), so of course we were approved for Adsense (and other higher paying networks) with no problems. For sure you must meet the basic eligibility requirements to get approved. From there it is anyone’s guess, but I would assume you need substantial content (many blog posts, an “about” page, links to other sites, some back links, comments, etc.) and have been running your blog for some time (I hesitate to guess, but maybe 4-6 months or so). I reached out to Google directly requesting more info, but they sent me to the same page I link to above.

Once you apply, I’ve heard it can takes weeks to hear back. But don’t let that discourage you…apply and see what happens. For anyone reading this that is using Adsense, it would be great to hear from you in the commentswith details about your site at the time of approval and your experience with the application process.

8. Where Should You Place the Ads?

To get higher CPMs, you need your audience to engage, as in click (and in some cases make a purchase), on the ads on your page. The ad networks track this stuff. And of course the ad has to actually be displayed, which means the user shouldn’t have to scroll too far down to see it. So if you just think about this logically, you’ll figure out different ways to make ads perform better and therefore pay more.

Here are some examples (I do not recommend you do all of these things!):

Place the ad above the fold (ATF), perhaps in the header.Set it apart from other images or ads (avoid ad blindness from stacking a bunch of ads together).Place it in the middle of the blog post.Place it between the blog post and the comments section (this one works well for us).Have it ride at the bottom or top of the screen (some ad networks can provide you with special ad tags for this).Place your sidebar on the left rather than the right (people read from left to right).Pop up, pop under, play video, etc. (I personally can’t stand these ads).Show “ugly” ads (like “belly fat” or “one trick” ads).Don’t restrict sensitive categories (politics, gambling, downloads).Run a bunch of different ad zones (the more the better, right?! Cha-ching! Just don’t go overboard…).Play with the colors if using Adsense text ads (I’ve never done this personally, but Google recommends it).Experiment with different ad sizes.

As you read through that list, I hope you cringed at some of the bullet points. At some point “in your face” ads make a site ugly and difficult to use, and therefore end up making you look bad and ultimately driving traffic away from the site. So yeah, while you might be making good CPMs by using invasive ads, you are likely throttling your future growth. Different blogs have different purposes and styles, so you’ll have to find a middle ground that you feel comfortable with. Personally we don’t do anything that we would object to when browsing another site.

As you can see in this post (scroll down to “Finding Balance”), we went a little overboard with the number of ads at first. We scaled back and currently run a 300×250 above the fold and then a 300×250, 160×600, and 728×90 below the fold. We also have a 650×300 between the end of the blog post and the comments section, but it collapses if there is no ad to show (so you may not see it if you go to my wife’s site).

Something else to consider is that aside from appearance alone, your ad networks will dictate how many ads and of what size you can display on a page. For example, if you are using Adsense you are limited to three display ads per page (scroll down to “Ad Limits Per Page” in this article for more details).

9. Standard Ad Sizes

Obviously this whole process would be difficult if advertisers created whatever ad sizes they wanted, so luckily some standards were developed. The most popular ad sizes are:

300×250728×90160×600

Adsense has an article about ad sizes here. I haven’t seen much demand for the mentioned 336×280 zone with premium networks, so I don’t use it.

10. How to Place Ads on Your Blog

After you create a new ad unit (in your ad network’s dashboard), copy the ad tag that is provided. Here is an example of an Adsense tag:

Sample Adsense ad code

Now paste this in your site where you want the ad to appear, such as in a widget in the right sidebar. To do so, open the Wordpress backend, go to Appearance>Widgets, drag a text widget to the right sidebar, and then paste the ad tag within.

Adding Adsense ad code to a right sidebar widget

Save, refresh your page, and viola! There is your ad. After some time has passed you’ll be able to see performance metrics in your ad network’s dashboard. Note some networks have a day lag in reporting, and some changes you make to your ad settings can take 20 minutes or so to propagate.

The new ad as it appears on the blog

11. How to Filter “Bad” Ads

Your site is a reflection of you and/or your brand, so you should be OK with anything that appears on it. For example, you may choose to filter out some or all of the “sensitive” ad categories such as religion, black magic/astrology, politics, dating services, etc. Luckily every ad network I’ve worked with provides these filtering options, however the granularity of filtering control beyond that varies quite a bit and is something to consider when choosing who to work with.

Adsense offers lots of additional filtering options including general categories and sub-categories, specific ad networks (Adsense pulls from many different ad networks), specific URLs, and even an ad review tab so you can see which ads are actually showing up on your site. Sometimes a “bad” ad will slip through the filters (perhaps it was tagged incorrectly), so I like the ability to find the bad ad, search for any that are similar, and then block them all.

Filtering out a “bad” ad in Adsense

12. Terms and Conditions

It’s important to pay attention to the terms for each network so you don’t get caught off guard or violate them (and risk being dropped from the network). Here are some things to consider:

Payment may lag a few months or more behind the period you run ads (here’s a link to Adsense terms). It’s typical for premium networks to take even longer (net 60, 90, or even 120), so don’t expect to get paid right away!Make sure your site is in compliance with minimum requirements.Don’t run too many ads on your site.Some networks will require at least one (or even all) ads to be above the fold (ATF).Some networks require exclusivity (Adsense does not), so choose wisely. Personally I don’t work exclusively with any one network because I find that too limiting.Watch out for contracts that lock you into working with a network for an extended period of time, such as 6 months or more.

13. Premium Ad Networks

OK this info is beyond basic, but you should know about it if you start to run ads on your site. Premium ad networks, (like Federated Media, BlogHer, Say Media, etc.), generate higher CPMs (say $1.50 to $6) so can really increase your income. They take a larger cut (usually 50%), but the net to you is still often much higher than Adsense. However, they require publishers to have higher traffic #’s (and substantial social media following in some cases) to get accepted. They also usually have lower fill rates – more like 40% on average, but it depends.

14. Setting Up a Daisy Chain

In order to make the most of every impression, you can create what is called a daisy chain (aka waterfall). A simply daisy chain would be your premium ad network getting the first call from your site with Adsense set up as the backfill (since Adsense fills close to 100%).

premium network 1 > Adsense

To do this, you place the premium network ad tag on your site. You then login into the premium network dashboard and find where you set up your backup ad tags. There should be a place where you can paste your HTML code from Adsense (which is the same ad tag you’d be placing directly on your site if you were using Adsense alone). I recommend you name your Adsense ad unit accordingly, perhaps something like “300×250 ATF (backup from Federated Media)“. This lets you know the ad size is 300×250, the ad zone is above the fold (you see it without scrolling), and it is a backup to Federated Media.

Heck if you can get accepted to multiple networks, you might set up a daisy chain like this:

premium network 1 > premium network 2 > Adsense

If network #1 has an ad to show at say $3 CPM, fantastic. If it doesn’t, rather than serving a blank (no $ for you), it calls network #2. Maybe network #2 has an add to show at $2.25 CPM. Great! Still better than the $1 CPM you would get with Adsense alone. But if neither has an ad to serve, at least Adsense will fill at virtually 100% and ensure you makesome money on that impression.

But unfortunately in this last position, Adsense won’t pay you $1 CPM in reality. It might be more like $0.40 CPM. I’ll save the technical details, but understand the first ad call is the most valuable to the ad network. But in the end, you’ll still make more money with a premium network in front of Adsense versus Adsense alone. This chart shows how.

One word of caution – you typically don’t want a daisy chain longer than 2 or 3 networks. The reason is that every time you roll over to another ad network in the daisy chain, there is a delay (called latency). If your daisy chain is too long, your reader may never actually see an ad, resulting in $0 for you for that impression. Plus, on average you’ll lose around 5% of impressions at each step in the daisy chain.

15. A Brilliant Idea?

When I first started learning about all this, I thought I had a pretty good idea. At the time we were seeing about a 33% fill rate and $2 CPM with a premium network. We tried a few other premium networks and saw similar performance with each. They were daisy chained, so network 1 saw 33% at $2 CPM which rolled over to network two at 33% at $2 CPM and once again to 33% at $2 CPM for the third. With 500,000 pageviews, that results in $703.70 in revenue.

I started thinking. Since 33% x 3 = 100%, I thought if I could just get each ad network to fill at 100% but for 1/3 of the impressions I had been sending them, and use all 3 networks, I’d be making $2 CPM with an effective 100% fill rate. That would result in $1,000 in total revenue, or a 42% increase.Brilliant, right?!

Except it doesn’t work that way. I naively called my account mangers and said “Hey, can you just fill at 100% for 167,000 impressions rather than 33% on 500,000 impressions? It’s the same number in the end.” Well, they can’t do that. If you send them 100,000 impressions or 1,000,000 impressions, you’re going to get about the same fill rate. Hence the need for daisy chains (or more sophisticated ad optimization strategies that are beyond the scope of this post).

16. What About Ad Servers Like DFP?

You may have heard of DFP (Double Click for Publishers), which is a free ad server offered by Google. With DFP Small Business you generate ad tags and place them on your site (along with some head code) one time, and then you set up your various ad networks, ad sold direct, and/or house ads in DFP. This gives you control of scheduling, allows you to turn various networks on and off, generate reports, set Adsense to compete with other networks, and so on, all without having to replace ad tags on your site every time you need to make a change. Since this article covers the basics, I’m not going to get into details with DFP. But you should know that for the inexperienced, it is not straightforward to set up or use.

Google Double Click for Publishers (DFP)

17. Next Steps

As I mentioned, I suggest you start with Adsense and play around a bit. It’s easy, and if you are just starting out, earning even a small amount can be inspiring. Or perhaps you are like we were a few years ago – late to realize we could have been earning considerable money running ads with the traffic we alreadyhad!

I take great satisfaction in knowing that we are being paid for all the hard work associated with developing content and driving traffic on my wife’s blog. If we get a traffic spike we are automatically compensated. When you start to see big traffic numbers, then working with multiple networks and optimizing are natural next steps.

Obviously there is a lot of info to cover on this topic, but I’ve tried to share the basics that I wish I would have known as I started out. Let me know in the comments about any successes or challenges you have experienced when using ad networks.

Courtesy

http://problogschool.com/ads-102-how-to-make-money-using-ad-networks-blog/