Google financials show it is shifting revenue from its partner media sites

Google financials show it is shifting revenue from its partner media sites

Summary: Google's Q4 results show a continued revenue shift away from partner sites--such as media and web services.

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TOPICS: Google
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The key numbers in Google's latest financial results are TAC (Traffic Acquisition Costs), and the revenue from its own sites, compared with revenue from network partner sites such as the New York Times.

GOOG has generally maintained a 50/50 split between revenue from Google sites and revenue from third-party Google network sites. But over the past year it has begun moving more ads through its own sites where it doesn't have to share revenues with partner sites.

A lot of media companies, such as the New York Times feature Google ads prominently on their online sites. In some cases Google hands over as much as 100 per cent of the revenues to key partners. It does this to gain distribution and it is also able to grab the customer relationship through its "advertise on this site" feature.

Tuesday's Q4 GOOG report shows Google sites generated revenues of $1.098bn, an increase of 24 per cent from Q3.

Network sites generated $799m, an increase of 18 per cent from Q3.

(In Q3 revenues from Google sites grew 20 per cent as revenues from Google's network sites grew 7 per cent.)

TAC costs in Q4 decreased "reflecting primarily the continued shift in our revenue mix from Google network revenue to Google-owned site revenue."

This is bad news for media companies that are already hurting badly from the efficiency of search engine marketing, and were at least earning some money from being members of Google's AdSense advertising network.

It is also bad news for the many VC funded web service startups whose revenue models are based on being honey pots for Google AdSense clicks.

Topic: Google

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  • The reason it is shifting is...

    ...that the authenticity of the traffic is lousy from the partner sites. With the exception of a very few, very large partner sites (such as NYT, as you mentioned), the performance of the CPM model of AdSense was completely lousy.

    I, for one, had an experience whereby I bought some ads on very targeted partner sites. They told me that a click-through ratio below .5 percent would be a failure. What I received was .01 percent. Yes, that is NINETY EIGHT PERCENT BELOW what they thought would be a failure. This is despite being on super-targeted sites for my niche and having what I thought was a pretty compelling ad. The only explanation for this is that most Ad Sense sites are either generating false impressions, or they are burying the ad so deep that nobody could ever notice it.

    I was paying roughly $5 per thousand impressions, and that equates to a $50 PER CLICK cost. Why would I continue paying that when I can pay a tiny fraction of that on a PPC basis with Google's properties? CPM is so dead. Unfortunately, that is not the only CPM horror story. I will never use that model again.

    Mark Brandon
    Sustainable Log - News and Views for Socially Responsible Investors
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    When you subscribe to Sustainable Log, we give $1 to Alternative Gifts International in support of a cause of your choice.
    208mbrandon
    • You are right

      Ads on search pages perform much better than on content pages. What does that say for the Google click "honey-pots" being built by startups and by content aggregators?

      I've played with the ad networks such as AdSense and Kanoodle, on my http://www.siliconvalleywatcher.com site and I'd earn less than a dollar a day and I get about 1/2m page views a month.

      There are two problems: The AdSense contextual ads are bad at being contextual.

      Secondly, there is a lot of trash content out there trying to land some Google clicks and that brings down the performance of the entire third party network.
      foremski
  • Content needs to be relevant to advertisers

    We are like blind people patting down the Google elephant, each reporting on micro experiences in vastly different contexts. SiliconValleyWatcher.com has done well by citing Google?s revenue trends.

    Google?s lack of transparency is handicapping the ability of publishers to be more effective at driving traffic to advertisers, and for advertisers themselves to obtain the best traffic for the money.

    Late at night, with my blindfold on, huddled around a tusk or a leg, I sense that Google software developers are crowding in beside me, attempting to figure out the elephant themselves. Not a poet or traditional library cataloguer in the bunch.

    ?What is this thing called language?? and ?How do people use words?? echo throughout the room.

    Banner ads generally have click through rates of 0.5% or less. If less than 15% of the visitors to my AdSense pages click on a Google text ad, it is often because my keywords are unstable or in a language that Google is not yet adept at handling, like French or Portuguese. Conversion rates of 40% or more are common.

    Google can provide incredible value for advertisers compared to other advertising opportunities. The challenge for publishers is to put up pages that draw readers who are ready to click on ads and who are ready to buy something.

    If Google cannot figure out how to work with publishers to serve ads that are relevant to readers, then publishers could switch to banner ads served by ad agencies that are better able to work with publishers.

    For example, some of my poetry websites have passable hit rates but low conversion rates because the poetry readers are not ready to buy the products and services advertised by Google through aggregators on the sites. The poor click through rates help account for the 3 to 4 cents per click generated from those sites.

    On job training websites, in comparison, viewers are happy to click on text ads for job training opportunities and I earn $1.50 per click from Fabulous.

    Neither with Google, Fabulous nor any of the other ad firms have I seen a way for advertisers who come to an AdSense or Fabulous aggregated page to post their own ads on those pages.

    If a firm wanted to post an ad on one of my job training pages, I don?t see how they could find their way through the maze to be able to do so. The page might be perfect for their ads, but without opening up the process, all stakeholders will continue to miss opportunities.

    Google?s reluctance to share pricing data with publishers creates a sense of distrust. There is resentment because publishers can earn far higher rates through aggregators who avoid Google, but Google?s unbeatable ability to serve up relevant ads (and generate high click through rates) has made them appear to be the only game in town, until now.

    The new elephant is barely visible through the rain here in Seattle.

    Whether MSN can open up the online advertising process with its own adCenter service remains to be seen. No poets over there either.
    aem76
    • Dif between AdWords and AdSense

      Let?s look at the difference between AdWords ads on Google search results pages versus AdSense ads on third-party publisher sites such as NYT. Viewers of search results are often poised to buy something.

      Ads work better with people who are about to buy, it is easy to tailor ads to them based on their search queries. So it is expected that earnings from AdWords would outpace those from clickthroughs on AdSense pages.
      aem76
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