Are fewer ads always better?
Google recently announced that it will penalize sites with more than three ads above the fold. Frequently, these sites are low-quality sites with super-SEO'd, thin content landing pages designed to have people quickly bounce off the site when they click on one of the ads.
There are two conflicting reasons why Google may penalize them:
- People may be less likely to click on AdSense ads if there are more ads, or
- if too many of these pages rank high on search results then people won't use Google.
Most likely, it's the latter, since Google knows that content-thin landing pages hurt it in the long run even if they produce more immediate profit for Google. However, placing advertising this densely before Google started penalizing sites was only profitable for thin content sites specifically designed for it, not for sites with actual human readers. Many of the clicks would even be misclicks, which would decrease the value of AdSense ads for AdSense advertisers. This would hurt Google even though they received more clicks for a while if they had continued to not penalize sites with more than three ads above the fold.
For sites with real content read by real people, too much or too little advertising can drastically cut revenue and either one could make a site with good potential to make money unprofitable. This is true for almost any type of advertising but it's especially true for banner ads and in-text ads. In-text ads by companies like INTENTclick, a specialist ad provider for sites about making money and coupons, highlight words with links and you get paid each time someone clicks on a link. Figuring out how many INTENTclick ads to place per page is difficult if you don't understand why you don't want too many or too few ads. That's why I'm taking a concept from government and economics about setting the proper tax rate to maximize government revenue and applying it to advertising density to illustrate how you should figure out how many ads to place on your site:
Laffer curve explained
Politicians use the Laffer curve to claim that reducing taxes for the richest Americans will raise government tax revenue, because they assume that the reduction in taxes will create so much more commerce that more money will be generated even the wealthy are being taxed at a lower percentage.
But it doesn't usually work that way. There's really an optimal tax rate for getting the most tax revenue. If taxes are already below this rate, like they are in the United States, then cutting taxes even more will decrease revenue. Cutting taxes when the tax rate is beyond the optimum will raise revenue, but the optimal tax rate for wealthy people is usually pretty high since they tend to save their money instead of putting it back into the economy. This means that although cutting taxes for the wealthy doesn't increase revenue when taxes are too low, it can increase revenue it taxes are too high and the tax cut brings the tax rate closer to optimal.
How does this apply to INTENTclick advertising?
The Laffer curve can be applied to a site's in-text advertising density, and reducing the density of in-text ads results in more revenue a lot more frequently than cutting taxes does in the real world. The reason is that too many ads devalues your site since people quit going to it if you have too many ads, or they quickly go back to their search results. On the other hand, if you have too few ads, you'll have a lot more readers but they won't give you PPC revenue very often since there won't be enough opportunities for them to click on ads.