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Monday, January 17, 2005

AdSense Faces Extinction -- Unless Google Shakes Things Up

When Google's now-ubiquitous text-link advertising program debuted in 2003, it was widely praised as the ultimate advertising solution for highly trafficked sites that were hard to monetize, especially blogs.

Blogs are typically run by a single person or a small team of people, most of whom do not have the experience or ability to manage advertising programs. Therefore, AdSense opened a world to revenue for dedicated site owners who knew how to generate traffic but not dollars for their work. Webmasters would simply open an account, run the ad wizard, paste in a few lines of JavaScript code into their sites, and bingo! -- instant ads on your site. The ads displayed were perfect because they were similar to the content on said site.

It was the best of both worlds. And it worked pretty well for a while.

But cracks are starting to show in the AdSense facade because of:
1. Fickle interest in Google's uneven AdWords content targeting, which provides the source of the text ads, as well as the risk of PPC fraud that is causing many AdWords advertisers to shut off content targeting

2. The combination of lower clickthrough rates and fluctuating equivalent CPMs

3. Expanded options for publishers that didn't exist or weren't mature when AdSense arrived.

Then there are the questions of accountability on Google's part. How do you know that you're getting full credit for your clicks? How do you know that unscrupulous publishers aren't committing PPC fraud on your ads?

I don't have a full body of evidence to support this suspicion yet, but the signs are growing.

Many publishers are concluding that the risk of AdSense isn't worth it and realizing they can operate their own text-link advertising programs and generate far more revenue per month than with AdSense.

Then there are the many affiliate options (oh, the horror!). For popular blog sites, there's also the burgeoning BlogAds network. It's as easy to operate as AdSense and much more targeted and lucrative than AdSense. Another one to bear watching is RSSAds, which hasn't launched its service yet, but promises to allow publishers to monetize their RSS feeds. It's sort of an AdSense for RSS feeds.

Maybe Google's looking at something similar on their own. They'd be silly not to. Given Google's stated mission of blanketing online content with content-targeted ads, you can bet they will be watching that outfit closely.

It's too soon to tell if these factors will seriously threaten AdSense, but Google must surely be concerned. But even if Google can solve these problems, the concept itself still might not be the right solution.

For sites with a loyal following of repeat visitors, AdSense proves less useful to them over time, especially if the ads are essentially unchanged for long periods of time. Visitors will simply tune the ads out if they get too familiar with them.

All of this leads me to believe that AdSense is not long for the world -- unless Google makes major changes that restore the perception early on that AdSense was worth it for publishers. Here are some things Google can do:
1. Increase the revenue share to publishers

2. Provide more accountability so publishers know if they're getting the value they need

3. Provide more transparency and allow publishers to more easily "hack" AdSense to their advantage

4. Offer more customization options for the ad creative, such as randomizing the order or putting limits on how many times an ad can appear

5. For advertisers, make it even more compelling to choose content targeting. AdSense doesn't work unless there is a large enough stable of ads to display.

I'm not ready to write AdSense's obituary just yet. I'm confident that Google will acknowledge these risks and take steps to rectify them before too many publishers flee.

Posted by Cory Kleinschmidt




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