Adsense Glossary

Contextual advertisement

An ad is contextual when it is choosen by the service, the Adsense robot in this case, to match the content of the page. Practically the robot searches for keywords in the page and select ads targetted to these keywords.
Actually the targetted keywords are not taken in the text of the ad, they are choosen by the Adword customer that is the source of the ad.

CTR

Clickthrough Rate. This is the ratio of clicks related to the number of impressions (displays).
Technically, it is number of clicks an ad makes divided by the number of displays of either
- the ad or
- the ad unit or
- the page,
depending the type of impressions.

eCPM

Effective CPM, cost per thousand. The formula is the incomes for a channel, divided by the number of thousand impressions.
Example:
- Gained: $5
- Impressions: 3500
- eCPM = 5 / 3.5
The result is $1.42

Incentives to click

This is the set of action the user could make to let visitors to click on the ads. This is forbidden and lead the account to be disabled. The simplest incentive is a message saying directly to help the webmaster thank to the ads. But less evident actions are prohibited too. An image near an ad for example is too. Any things that could make bad clicks, i.e. clicks that do not lead true visitors to the targetted site are incentives.

Refferals

Referrals are non-contextual ads. Actually there are ads choosen by the user, unlike contextual ads that are choosen by the service, and clicks do not make money. The amount is fixed and is given only when the visitor performs some action: downloading a software, registering a service...

ROI

Return on Investment. For a client of Adwords, the ROI is the score of the value to his business gained in return for the cost of the ad campaign. Technically it is the ratio of the cost of the campaign relative to money made with conversions of clicks. In return, the ROI is used to modify incomes from Adsense clicks for a given account depending the quality of the clicks.
The formula is: (Revenue of conversion - Cost of campaign) / Cost of campaign.
Reference.

More definitions

The Adsense glossary. From Google.