The Clickable Search Engine Marketing Blog

A new trend in online advertising is to include fewer, more effective ads on any given page. (One place you can see this trend in action is on Hulu. All of their videos are introduced or broken up with ads, but it’s often the same ad, repeated―it’ll stick in your memory and won’t interrupt you for longer than 30 seconds.) Google’s model for pricing and placing contextual ads is on the forefront of this trend. When a site registers with Google AdSense, they can customize a box set aside for Google ads on their site (those boxes with “Ads by Google” in the corner). Each box will contain up to four text ads or; as in the example below, one Image ad.

What this means is that all contextual ads ― text and image ― are ranked in the same auction, regardless of whether you’re bidding a maximum CPC (Cost Per Click) or a maximum CPM (Cost Per Thousand Impressions). Google uses both kinds of bids to calculate an “Effective Cost Per Thousand Impressions”, or eCPM. (The precise algorithm isn’t public, but a good rule of thumb is “CPC×CTR×1000=eCPM”.) This allows them to determine how much revenue they can expect from each bidder, and to place ads accordingly.

Once Google does the conversion, the bidder with the highest eCPM gets the spot. However, because an image ad would take up the entire AdWords space on a partner site, it needs to rank higher than the next four bidders in that auction combined. (However, there are cases when Google chooses a particularly relevant text ad to fill the entire space.) This means that you’ll need a higher eCPM to place Image ads than you would to place text ads on the same site, but you get a large and exclusive chunk of real estate in return.

In the past few weeks, we’ve introduced support for Image Ads (and other emerging ad formats )