Sunday, November 8, 2009

Is Google Fair to AdSense Publishers?

There has been much discussion lately on blogs, forums and even the AdSense Support Forum from publishers reporting that they've seen some pretty big drops in AdSense revenues.

By now, everyone should know about the global economic crisis and there's no denying that the US is in a recession. Advertising gets hit hard during a recession and many publishers are taking notice.

I decided to take a look at numbers Google files with the SEC related to it's advertising and AdSense in particular to see what's going on. I've included some charts to help interpret the data. The last quarterly report filed was in September and the annual report hasn't been filed yet. I'll revisit this subject when it does.

From what I've seen, Google seems to be very fair to it's publishers in some ways, maybe could improve in some other areas but most importantly, there might be cause for concern if you rely on your AdSense revenue in these tough times.

How much does Google keep from AdSense clicks?

This is likely different from publisher to publisher, especially when it comes to those that get invited to be premier publishers and can negotiate their own terms, but Google does list the revenue generated by AdSense and how much goes to the AdSense publishers in their SEC filings. The chart on the right shows the publishers share in red and Google's share in blue.

Over the past 4 years, Goolge has paid out an average of just over 80% to AdSense publishers. Beofre they were only giving publishers a little less than 80%. Considering the infrastructure and the quality of their targeting, that seems like a good deal. If you have a website with significant traffic that appeals to advertisers, you could do better with directly selling ads yourself, but even big publishers use AdSense because the small percentage they take is justified by the time saved. Big publishers likely have negotiated better terms and from reading the 10-Q statements, it seems that some publishers even have guaranteed payments defined in their contracts.

Google has been taking a smaller cut from AdSense

If you look close at the chart Google has been taking a smaller cut from AdSense in the past 4 quarters. 88% in the first two and 89% in the last two have gone to publishers. That may seem like good news at first read, but consider again that publishers have been seeing decreased revenue even with the increase in share. We also don't know how evenly that increase was distributed. It could have gone to all the premier publishers to meet contractual obligations or it could have gone to only regular publishers to help offset declining cost per click.

The good news is that Google seems to be willing to soften the blow to publishers a bit. Maybe they think this will only be temporary, until things calm down but many economists aren't expecting a quick economic recovery. Regardless, that's a nearly $120 million dollar hit they took to either keep publishers from bailing or to honor their contracts.

One of the things I've read in most of the quarterly reports is that advertising revenue is increasing due to increase clicks and not because of the increased price per click. If you want to keep your AdSense revenue up, you need to keep getting more traffic and more clicks.

Does Google keep the Good Advertisers to Themselves?

I've seen people ask this different places. This next chart shows what Google earns in advertising revenue from it's own sites in blue, the total revenue generated by Google Network web sites (AdSense publishers) in red, and the revenue share for publishers in yellow. Values are in thousands.

As you can see, ad revenue on Google's own sites has been climbing regularly while AdSense revenues haven't been growing as fast and have actually leveled off the last 2 quarters. In the first two quarters of 2004, AdSense publishers generated more revenue than Google did on their own sites. Now Google brings in twice as much revenue from their own sites.

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1 comment:

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