Dr. Darren Carter, founder of New York City-based Medical Coding.net ^[1], a website that sells books and software primarily about medical coding, used to pay up to $1,000 per month in online advertising. He still does, but now it no longer impacts his bottom line. That’s because he’s found a way to offset that expense letting other companies advertise on his corporate website through Google’s AdSense program.

“AdSense usually makes anywhere from $500- $750 a month, but we’ve had months that it’s made over a $1,000,” Carter says. He used to subsidize his own advertising for his business, but now “most months it’s a wash or very close,” Carter says.

Carter’s site gets a healthy amount of traffic each month. On average, Medial Coding.net gets about 3,000 to 4,000 ad impressions per day during the week, with about 600 per day on weekends. When Google launched the AdSense program a few years ago, Carter realized it might be a way to leverage all that traffic to capture a little extra revenue and immediately signed up to be one of the early adopters. “A lot of the visitors who come to the site are looking for healthcare products we don’t sell,” he says. “We’re pretty much a bookstore. So it works really well to have the additional ads for other medical products that compliment what we sell.”

Whether to allow ads or not

For Dr. Carter, allowing the advertisements of other companies on his site has been a great success. Other companies, however, may not be good candidates for Google AdSense ^[2] or similar programs, like Yahoo! Publisher Network ^[3], Adster ^[4], or AdMob ^[5] (for mobile websites).

“It’s all about monetizing information,” says Eric Giguere, author of Make Easy Money with Google: Using the AdSense Advertising Program. “For many Web 2.0 sites, serving ads is the only way to make money. But blogs, for example, don’t do very well with these kinds of programs. Their visitors tend to be ‘ad-blind’ only paying attention to the blog itself.” In other words, it depends less on the quality of the ad serving program and more on the core mission of the site itself.

Here’s a look at some of the advantages and disadvantages to serving third-party advertisements that business owners should consider in relation to their own business model.

Advantages

Serving third-party advertisements work best under the following conditions:

• The website gets a lot of traffic: This is especially true for sites that generate a lot of new visitors who are more prone to click on ads. Returning visitors tend to focus on the site’s proprietary content because it’s what they like and the reason they come back.
• The website has a low conversion rate: The conversion rate is the site’s ratio of visitors who perform an actionable behavior that’s of value to the business, like making a purchase or giving contact information. A high traffic site with a low conversion rate means a lot of visitors are passing through with no benefit to the business. Getting them to click on an ad is one way to get something of value from them before they leave.
• The website is content driven: Basically the content of the site is there to push traffic to the ads. “Google has what they call a ‘heat map’ ^[6] showing the best spots for ad placement. That’s why you often see those ads, for example, between the title of the article and the body of the story or near the navigational elements,” says Giguere.

Disadvantages

It’s easy to set it up and requires no outlay of cash, so why not allow third-party ads? Here are a few reasons that may give a business owner pause.

• Aesthetics: The ads, typically plain text with a thin colored border, are not that attractive and can junk up a page distracting visitors from more important content, like information about the site’s own products and services. “It just doesn’t look very professional. Most serious business owners don’t use it,” says Eric Peterson, author of Web Analytics Demystified.
• Drives away traffic: Most ad serving programs pay by the click. However, it’s usually in pennies. What’s it worth to the business to keep visitors on the site longer for shopping, gathering information about services, or submitting contact information and generating a possible customer lead? For most companies, the answer to that question is probably more than a few pennies.
• It costs a lot of money to make a little money: Carter has successfully found a winning formula to leverage AdSense to pay his AdWords tab. Notice, however, that he is not making a living off of serving ads. In fact, very few people do. “You hear of people saying they make $10,000 a month off AdSense. What they don’t tell you is their spending $9,000 a month to do it. The people who really gross a lot of money either own one or two really high traffic sites or literally a thousand tiny sites paying off five dollars a month here and there. It’s a lot of work,” says Giguere.

Deciding Factors and Conclusion

A business owner considering serving ads on the company site would be wise to follow the principal creed of all doctors: first, do no harm. This is one of those times that experimentation can hurt. Be careful of driving away customers prematurely or diminishing the company brand with cluttered pages and amateurish ads.

Secondly, set realistic goals of how it can help the bottom line. Is the site optimized to succeed in serving ads? For the business considering an ad serving program, he or she will first want to have clear expectations. How much revenue off the ads would make it a success? For Carter, success has meant making enough off serving ads to subsidize his own online advertising. For another business, it may need to be the site’s primary revenue stream.

Like everything else in business, balancing the risks against the chances of success is where the answer lies.

SIDEBAR: Ad Serving Programs to Explore

For businesses that want to run third-party ads on their websites to raise a little extra cash, here are some of the ad serving programs to consider:

Google AdSense ^[2]: By far this is the largest and most popular ad serving program available. Signing up literally takes minutes and it is all but turn key after that. “AdSense is possible because it’s all about automation. Google’s crawlers determine which ads to place on your site based on the criteria you input. They’ve found a way to open up their advertising network to all these little sites,” says Giguere.

Yahoo! Publisher Network ^[3]: Less popular than Google AdSense, the Yahoo! service is gaining ground. It’s only been out a couple of years and is still technically in beta. Since Yahoo! And Google keep their reimbursement formulas a secret even from the site owners who participate in the program, it is impossible to say which is more lucrative. One key difference from Google, however, is Yahoo! only allows U.S.-based websites to use their program.

Adster ^[4] This lesser known company, based in Milipitas, Calif., has a slightly different business model. Websites aren’t compensated according to some mysterious pay-by-the-click formula; rather site owners set a price for their ad spaces. Advertisers can negotiate that ad rate, with the site owner refusing if the price offered is too low. Adster facilitates the sale and cuts the check, minus its take.

AdMob ^[5]: As the name implies, this is a specific ad serving program for websites optimized for mobile users which is a fast growing market. Since the .mobi domain became available for sale a little over a year ago, more than half a million .mobi sites have been registered worldwide, with most of them in the United States. AdMob, like Google and Yahoo!, compensates on a shared pay-per-click model, as well.