## Friday, January 5, 2007

Google Adsense has a simple calculation formula in order to calculate the Adsense earnings of publishers. Before I go into explaining the formula, you need to first understand Adsense's lingo that they use.

* Clickthrough rate (CTR) is the number of clicks an ad unit receives divided by the number of times the ad unit is shown (impressions).

* Effective CPM (eCPM) is cost per 1000 impressions. From a publisher's perspective, CPM is a useful way to compare revenue across different channels and advertising programs. It is calculated by dividing total earnings by the number of impressions in thousands.

* Impression is the number of times an ad is displayed on Google or on sites or products in Google's ad network. A page impression is counted each time an ad unit is displayed on a publisher's site. Page impressions are used when calculating reports for Adsense publishers, rather than ad impressions.

* Earnings is total money that would be given by Google Adsense for publishers who participate in their affiliate programs.

* Earnings Per Click (EPC) actually is average cost per click that would be given to publishers depends on the sum of the click, page impressions and advertiser's bid. It is still unknown exactly how Google Adsense uses the EPC.

Here is the actual formula that Adsense uses:

CTR = (Clicks / Impressions) * 100

EPC = Earnings Per Click

eCPM = (Earnings / Impressions) * 1000
eCPM = CTR * EPC * 10

Earnings = eCPM * Impressions / 1000
Earnings = CTR * EPC * Impressions / 100

Hopefully this was a good starter tutorial on how Google Adsense works.