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Google has a huge advertising community in all business areas and most niche topics and thus a huge database of advertisements just waiting to be shown. The advertisers may be world-renowned brands, small companies, affiliates or indeed anyone who has something to sell. The ads are targeted by location and can be published in a variety of different languages.
To find the most suitable adverts for your pages, first of all, Google's spiders or bots, if you prefer, will have visited your website to check out the content. From the keywords, they will have ascertained what your site is about (their technology is so advanced that it can differentiate between the different meanings of words, depending on their context) and therefore which advertisements will be most appropriate to place there. In addition, Google will filter out advertisements unsuitable for family viewing and well as those which don't fit with your content. You can also use your own filters whereby you can choose not to show adverts from competing companies or from certain urls. Thus, even with all the filtering, unless you have a very narrow niche, they are likely to have thousands of adverts which they could place on your pages, so how do they decide which ones are placed and which aren't?
The answer is that they auction both cost per click (CPC) and cost per thousand impressions (CPM) advertisements, meaning that both types are in competition with one another. The auction is in real time and when it ends, AdSense shows the adverts, both text and image, which will result in the best earnings for a page and thus the best earnings for you, the webmaster.
As well as the content of the AdSense blocks being suitable to your particular website, you can ensure that their colour scheme matches yours. Within your account area of AdSense, you will be able to choose the size and shape of the ad blocks, the colour of the headline, text, link, background and border. In this way, the ad blocks that you publish will look to be a part of your site, not just a totally unrelated advertisement. Of course, some people choose to have their AdSense looking obvious, but I prefer to merge at least one block with my content, having my text wrapping around it. Naturally, all the blocks bear the Ads by Google legend but I think that a merged block gives a page a more cohesive look.
The actual html code which you will place on your web page will be generated by Google once you've chosen from all the variables available, but if you want to wrap text around a block you will need to do that yourself. As an example, this is what I use to place my AdSense block on the right hand side of the page, starting level with the title of my page or article. The body of the text then starts a couple of lines below that and is right justified nearly to the edge of the ad block. When the block ends, the text justifies to the edge of the page. You'll see what I mean if you look at the top of this article (assuming Google have some suitable ads to show, of course).
AdSense code here
Page or article title here
Text here
There are many other ways of incorporating ads (not only Google, but Amazon or any other affiliate organisation which provides their publishers with block-type adverts) but I won't go into them here. You should just do a little experimentation and see which looks best on your site. You can always change the position to see which attracts the most clicks (but don't forget to change the channel, so that you know which is which).
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