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Saturday, January 23, 2010

AdSense Revenue Share: 72% for partners, 28% for Google

Google's impressive Q4 2009 earnings report makes certain aspects of the business clear for all to see. For example, they report that revenues of $2.07 billion in revenue was generated by "Google partner sites through its AdSense program," and that "amounts ultimately paid to our AdSense partners" totaled "$1.47 billion in the fourth quarter of 2009".

Misleadingly, the report states that "TAC (traffic acquisition costs) as a percentage of advertising revenues" is 27%. True, but as a percentage of same-channel advertising revenues, it's 72%. There are virtually zero TAC's for "Google-owned sites."

Speaking of those Google-owned sites, they generated $4.42 billion, or 66% of Google's revenues.

In these numbers is the usual picture of impressive strength -- including the fact that the overall number of paid clicks rose 13% YOY (indicating continued success in optimizing page layouts while satisfying users) while click prices rose just above the rate of inflation, at 5% (indicating a leveling-off). But coupled with that strength is the interesting point that financially speaking, Google continues to provide only the illusion of a diversified company. It continues to do well, very well, based on its core cash cow. Elsewhere, it serves as a relatively polite intermediary that continues to face downward margin pressures.

The growth picture is an interesting mix: heavy investment in new areas like mobile (a longer road to profitability), and a relatively smooth path to continued growth simply by enjoying the great upside that remains in international markets in its core strength.

Which, in case anyone has forgotten, features the catchy advertising product: "Google AdWords."

The financial picture for GOOG remains very bright, but mainly because its core strength has such high margins, and Google (needless to say) owns the key "publication" (Google Search) outright.

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Posted by Andrew Goodman




Monday, September 03, 2007

Ads in GMail Prototype Predated Adsense?

Thanks to Phillipp Lenssen for this account of Marissa Mayer's and Paul Buchheit's debates about ads in email, and the timing of product development. The timing does seem a little bit incredible, but maybe GMail was in development for a long time. Lenssen is checking.

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Posted by Andrew Goodman




Monday, May 07, 2007

Welcome to the Hype Zone

Google, you do realize you zoned and built this neighborhood, don't you?

What you get when you search for "Google AdSense" -- (ok minus the spray paint):

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Posted by Andrew Goodman




Tuesday, March 20, 2007

Google Expands Pay-Per-Action Test

Google has been testing a "pay-per-action" ad model since July 2006.

Today they're announcing a wider rollout of the service, but still in "limited beta release."

In a brief chat yesterday with Rob Kniaz, product manager for Google advertising products, I learned that AdSense publishers will be able to add the pay-per-action units in addition to their current AdSense (CPM or CPC) ad units. They'll be able to shop for potential offers in a variety of ways, either by selecting a specific advertiser's offer or by incorporating keywords into their code and letting Google's system smart-match from their advertiser list.

From the advertiser side, there will be a dedicated interface that allows them to upload creatives as well as the parameters for payout (eg. $3 per sale; $35 per lead, etc.). I'm waiting to see the full implementation, but at this early stage it looks like there will be a couple of things to look out for:

  • Verification of the actions is a key concern. I always argued that cost-per-action was no panacea to the verification issues around CPC or CPM based advertising. To be sure, you can't fake a sale if money changes hands, but a no-good publisher or random vandal could certainly potentially generate low-quality or fake leads. As with pay-per-click, it's not quite good enough to argue that advertisers should lower their bids accordingly, since the impact of bogus activity could be quite uneven.
  • How are these outcomes going to be tracked? I assume through Google Analytics, Google Conversion Tracker, or Google Checkout.
  • As such, it does certainly expand the Google footprint in all of these areas. It also confirms that the introduction of products like Checkout were not disjointed experiments but rather part of a broader overall strategy that is only being shown to us gradually.
There are some clear positives in this experiment. In potentially opening up a CPA marketplace to all of its several hundred thousand advertisers, with tens of thousands of publishers on board as well, it instantly gains the clout of a service like Commission Junction or Amazon Associates, but with less friction and lower cost (and over time, greater variety to choose from, for both sides in the transaction). It gives publishers a new way of experimenting with maximizing their monetization efforts (with better targeting, not user overload as shown in the last post), and allows advertisers to explore a new way of buying content-targeted exposure through Google. Put another way, it allows merchants to set up an "affiliate program," but with considerably less hassle than with other affiliate systems.

To be clear, the cost-per-action test has nothing to do with the search results or ads next to them. It's an additional marketplace being built to facilitate cost-per-action ad payments between AdWords advertisers and AdSense publishers.

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Posted by Andrew Goodman




Monday, February 26, 2007

Seth on Contextual Ad Targeting

Seth Godin wonders whether media buyers are right to pull ads off Google's and Yahoo's contextual networks because of how loosey-goosey they are with their approach to placement -- they match ads to pages, rather than allowing the advertiser "channel control."

While it's true that Y!&Goog would benefit from better sites joining their networks, I agree with Seth that being so afraid to show your ads on "Joe Schmo's Sports site" could be doing the client a disservice.

I thought we already had this debate. In the early going, lot of us were critical of the contextual ad programs for a number of reasons - mine was simply the poor performance, fraudulent or crapulent publisher partners, etc. Others in the biz, with more of an agency bent (and most likely to cheer for Quigo, Sprinks, etc.), demanded that Google's content targeting allow more direct control of what websites ads show up on, as opposed to forcing advertisers to accept the open-ended "smart matching" concept that used semantic technology to match ads with content.

So... first Google responded with site exclusion. Then, they released a site-targeted flavor of content targeting, in a parallel program. That as a direct response to these agency-style demands. Site targeting allows you to browse a menu of sites, add them to your list, and only show your ads on them.

I monitored ads running in both flavors for several months. A funny thing happened: the old "flawed" content targeting program got better, and my approach to managing those campaigns improved. The ROI came in line with search. Meanwhile, nothing on the "site targeting" side was converting. The performance was much worse.

At a couple of conference presentations I guessed that this is in part because computers do a lot better job of matching my ads against a million potential candidate pages than I possibly can in scanning down a list of 50 so-so potential publisher targets. You settle on 20 or so of these sites, then become obsessed with spending the full budget on just those. They convert poorly, so you've overspent on this handful of websites. That's a fairly typical scenario.

In short, because of computers aiding in the matching, classic content targeting offers more efficiency, as the systems get perfected.

Seth, both the intuition and the data point towards there being nothing inherently wrong with Google's approach to matching ads with content. No, the program isn't perfect, but placing high-CPM ads on big brand sites just because I want to appear respectable isn't exactly a challenge. It's more of the same: take too much of the client's money, and waste it, and claim the blue-chippiness of that approach as a benefit.

Both approaches -- the finicky put-me-only-here approach, and the "ROI-or-else" approach -- work in the marketplace. For very different reasons. Funnily enough, Google now offers two parallel programs to suit different ad buying constituencies, and are working on rolling out multiple ad products down the road, to keep everyone happy.

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Posted by Andrew Goodman




Contextual Ad Transparency Coming: Google's Malone

Search Engine Land has it. Expect more Google announcements re: click transparency in the near future.

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Posted by Andrew Goodman




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