Sunday, September 7, 2008

Maximizing AdSense Revenues via Up-Selling

If you go into any Blockbuster Video store, you quickly notice the company’s use of a classic marketing technique – up-selling correlated products. This technique is highly effective at maximizing Blockbuster’s revenue and profit per customer. Moreover, this same technique can be applied to websites using Google’s AdSense program.

Up-selling is defined as selling additional, often higher priced, products and services to current customers. Ideally, the upsold products are correlated to the initial products – that is, they fill the same, or similar customer need that the first product did. Blockbuster up-sells its rental customers by offering them new and previously owned videos for sale. It also groups videos and posts signs saying “if you liked this video, you’ll like this video” spurring rentals of the new video.

To show how this technique can be applied to Google AdSense, let us look at an example of a painting website. To begin, it is critical to understand that by enrolling in the AdSense program the “product” that this website is selling is the keyword “paint” or “painting” as these keywords will show up in the AdSense results posted on their web pages. It is also critical to understand the price of these keywords, or how much the advertiser pays when someone clicks on one of their ads (a portion of which is passed on from Google to the owner of the painting website). In this case, top advertisers are paying approximately 19 cents for the keyword “paint” and 45 cents for the keyword “painting.”

By applying the technique of up-selling correlated products to the painting website, the website owner could dramatically increase the price of its products and the rate at which people buy (click on) the product. Like in the Blockbuster example, the key is to first determine expensive, correlated products to up-sell. In the painting case, one keyword that quickly comes to mind is “home remodeling” as painting is often part of a larger home remodeling project. Moreover, “home remodeling” has a price of $1.70, or nearly nine times the price of “paint.” Furthermore, finding keywords correlated to “home remodeling” yields even more expensive keywords such as “home improvement loan” which currently has a price of $6.50, or thirty-four times the price of the original term “paint.”

Now that the more expensive and correlated products have been identified, the website owner must create web pages with quality content about these products and entice, via text and links, visitors to go to these pages. The higher quality the content, the more enticing the product or service becomes, and the more likely a visitor is to click on one of the high paying AdSense ads.

In summary, by simply posting AdSense ads on their websites, most website owners are losing out on significant profits. Rather, they must identify the most expensive keywords that are correlated to their existing keywords and create web pages with quality content about these pages. While this requires some work, the returns on this investment are significant.