Placement is the fundamental factor that will effect an Ads performance - its click through rate. The first reason for this is simple - a visitor cannot click on an ad that they cannot see.
The second reason (which I talked about in Adsense Psychology - Below) is that your traffic will interact with webpage and consequently your ads in the way that you want them to interact with them. This is obviously a generalization as not everyone will interpret your layout in the same way but the principle is sound.
For example, I generally don't like ads at the head of the page above your content and navigation nor at the very bottom below both of these. These postions are too reminiscent of the traditional banner advertisement and for me don't come close to taking advantage of what Adsense ads actually offer.
The bottom line is that Adsense works best when the ads are integrated into your website as additional content. Adsense generates ads that are related to the actual words in the content of your page. To perform at it's best they have to be placed next to these words.
If you think it through this is just common sense.
This leads us to two places where content is contained on each and every website.
1. The actual body of that particular page - If you've built your website correctly then each page will be about a distinct topic. As each page differs in what it provides the Adsense ads will vary to match these differences. For example, a motorcycle insurance page will generate different ads to a motorcycle parts page. This means that the hottest spot for Adsense on every page is roughly where I've included the large rectangle on this page. Inside the page topic and above the fold.
2. The website navigation - Your navigation includes further pages which may be of interest to your visitor. Relevant Adsense Ads will also be of further interest to your visitor and therefore, a good supplement to a large rectangle ad inside the content of your webpage is a 160 x 600 skyscraper in your navigation (this often works best in the left navigation although I have several sites where the conversion is good on the right). Adlinks work well here too.
Google has produced a heat map to assist Adsense Ad positioning which pictorially confirms what I have been saying here. You can see it and read Google's own answer to the question of Ad placement here.
Adsense Psychology - Format and Placement
The first rule of integrating Adsense into your website is to acknowledge that your visitors will see and interact with your Adsense ads the way you see them and have consequently integrated them. If you think of the time you have spent deciding colors, site structure, images and everything else that makes your website, the same amount of energy and precision should go into getting Adsense just right on your webpages.
As you have complete control over the design and layout of your webpages, you also have complete control over how a visitor interprets and ultimately interacts with your pages - and this includes your Adsense Ads.
First and foremost, the size and placement of your ads suggests to the visitor how he or she ought to interact with them. For example,
1. If you use a 728 x 90 leaderboard at the top of your page you are saying to your visitors - "here are some ads which I do not consider to be actually part of my website but I hope that they will catch your eye as you look to the actual content of my website".
2. If you use a 120 x 600 skyscraper in either your left or right navigation you are saying to your visitor, these ads are like my navigation, something extra to the page which you are currently on and to be used like the rest of my navigation if something in them takes your fancy.
3. If you use one of the square or rectangle shapes inside your actual page content, you are saying to your visitors that "these ads are integral to the content of this page and should be read as you are reading the rest of these words - as content relating to the actual page topic".
Needless to say the last of these will always perform better than the other two examples.
View Adsense ads as supplemental content to your page content, integrate them into the structure of your webpages that way and your visitors will interact with them that way giving you a much higher click through rate.
This is the first step to success with Adsense. If you view Adsense as just an easy way to make a couple of extra dollars that's all you will do with it. If you take the time to structure your website and integrate Adsense so as to supplement the page content your click through rate and your earnings will go through the roof.
There are many ways to do this successfully and many different sites that Adsense can work on.
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