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

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

Posted: 13 Dec 2009 06:07 AM PST

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:

I don't hate google or AdSense—this article isn't a rant against either.
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

Imagine 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.

Post from: Blog Tips at ProBlogger.