The Adsense revenue equation

Revenue is generated for you when someone clicks on an AdSense ad on your site. Google charges the advertiser for the click thru and shares this revenue with you.

The amount you earn from an ad is given by the following equation

Income PER AD=

Click thru price X 
Fractional pay out X 
Click thru rate X 
Page traffic X 
Appearance frequency

The CLICK THRU PRICE is the price the advertiser is bidding to place an ad under the AdWords program and is determined by a complex real time automatic auction process: Google advertisers set a maximum price they are prepared to bid for keywords and they usually pay less than this.

The FRACTIONAL PAYOUT RATE is the percentage of its revenues that Google pays out to AdSense partners. THIS FIGURE IS NOT DISCLOSED BY Google. However, anecdotal evidence suggest the payout rate is good and competitive systems such as 7search.com payout around the 50% mark.

CLICK THRU RATE is the number of times the ad is clicked on divided by the number of times it is displayed ("impressions").

PAGE TRAFFIC is the number of times people visit your web page.

APPEARANCE FREQUENCY is the number of times a particular ad appears on your page (remember that ads are rotated by Google automatically and successful ads are shown more often.)

To repeat: this is income PER advertisement, so to calculate your total AdSense income you need to evaluate this equation for each ad on all your web pages and add up the results.

By the way, Google saves you the bother and tells you the answer.

But already the complexity of the process is apparent and of these factors, some are completely out of your control:
Fractional payout rate and Appearance frequency being two.

So let's look at those three factors that are at least partially within your control.

Click thru price

The Click thru price, whilst fundamentally determined by the advertiser, CAN be influenced by the content of your website:
if you can modify your site so that it includes more content related to higher value keywords, you are more likely to get
higher value click thru prices.

For example, if you run a site about Bird Watching you may get ads posted about Bird Watching books. But why not
extend the site to include content about the best binoculars for bird watchers?

Dedicate a page to this topic and you could find higher value ads running on that page because binoculars sell for
more than books and businesses advertising binoculars may be willing to pay more for keywords relating to them.

You could also run some pages about travel and hotels in exotic locations where rich bird watchers like to take their
holidays.

It's all content relevant to your site but it is likely to increase your AdSense revenues too.

ADSENSE TECHNOLOGY NOTE

The ads you get on different pages of your site will vary according to the content of the page.

AdSense is that clever!

If you've already got a site, you can get a tool from Google called the AdSense preview tool. This lets you see what sort of ads you'll get even if you haven't signed up for AdSense yet.