Is your goal branding or direct traffic? Sometimes impressions can be just as valuable if you are trying to increase brand/product awareness. If your goal is traffic-- it is certainly possible that site match, or image ads for that matter, are not for you. But, some industries certainly enjoy high CTR and excellent conversion with this inventory. So, the bottom line is to test and see.
Do you measure your ROI? If you have a high-ticket item, for example, it may take many impressions/clicks before you see a return. If you know your ROI, there are two real variables to control-- choice of sites and CPM. I generally recommend, therefore, keeping the number of sites in an adgroup to a minimum so that you can see what is working and what is not, and control things at the most micro level possible.
Lastly, and I think most importantly-- visit every site on which your ads are appearing. Remember, if the site isn't following the Adsense principles for maximizing CTR, then you aren't going to get a good CTR. Plain and simple. Many of the sites available bury ads so deep that they will never be clicked-- bottoms of pages, below footers, etc.
Hope this helps somewhat.
What is your ROI elsewhere? If you know that, then perhaps the best strategy is to stop at some predetermined multiple of the amount typically spent per transaction that seems right for your business conditions (ability to take risk, etc). If you track how many transactions it would take to bring you back to a positive ROI, or your typical ROI, then you will have a better sense of what to expect and when to pull the plug.
I have seen this multiple range from 2x to 50x, so it really does depend on what you are looking to achieve.
[edited by: arinick at 6:12 pm (utc) on Dec. 15, 2005]