You can ask the savvy website operator about what would be their biggest nightmare, and the usual replies will be along the lines of: “server crash”,”hack attack”,”Google bans me”,”get sued”, and so forth.

Yet none of the above matter if you are not making a cent.

A great majority of advertising-supported websites (especially ‘web 2.0′ sites) rely on AdSense. If they were to ever construct a P&L statement, the entire revenue segment would consist of AdSense revenue. The entire strategy is to pin a leaderboard + rectangle + one more spot on the site, remove borders, blend into the site, and voila – revenue is had. Some pin their hopes on a ‘premium’ bringing in money, but most over-estimate the number of people that will actually subscribe.

This is somewhere between high dangerous and insane. Having all your eggs in one basket is never a good idea.

Jason Calacanis was a smart man when it came to his Weblogs Inc network. He immediately knew that to make any real money, he had to build out a sales force. So while he trumpeted the fact that AdSense was making them over $1,000,000 a year he also noted that AdSense was secondary:

AdSense doesn’t reach the level of display advertising ($3-12 CPM) and it never will…

If a sales team (or even person) is still a bit of a stretch, it is prudent for you to look into affiliate sales. You have to consider what CPC is – the advertiser is spending time and money in bidding on a keyword. So the profit per click must be significant enough to warrant the price being paid per click (basically the ROI has to be worth it). In the case of CPA, the time advertiser spends much less time on the sale. So the profit per sale can be less (as the advertiser has less time to expense on each sale). Furthermore, the upsell in CPC is far more difficult than in affiliate sales. Lastly, in any market, there is always more than one advertiser (metaphorically – a basket). If one causes trouble, you can always go to the next.

If the above paragraph is confusing – read it again. And again. CPA margins are higher, ’selling’ on CPA is easier, and you have more than one basket – always a good thing.

We do (and are in the process of doing) what I have said above. I would say more than 50% of our revenue is CPA based. What is fantastic is for the same niche, Google CPC is roughly 15 cents. With CPA, it is roughly 43 cents. And click rates are higher. Our CPA CPM is roughly 4.5x more than Google CPC. In fact, we even have some pure CPA sites (no banner/rectangle/skyscraper/etc ads) that have tremendous CPMs.

AdSense is a good place to start, but it should not be your only (or even primary) source of revenue. To build a strong advertising-based business, one must fully look into assembling a sales team and the CPA model. Not doing so is being negligent to your business.