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Google transparency on advertising revenues is as clear as mud...

By | May 24, 2010, 2:16pm PDT

Summary: For the first time, Google has disclosed how much it pays publishers that carry its advertising, but the numbers are meaningless…

Google today made a big deal out of disclosing how much money it shares with web site publishers hosting its AdSense advertisements.

In the spirit of greater transparency,” wrote Neal Mohan, Vice President, Product Management, he revealed that it pays publishers 68% of advertising revenues around content, and 51% for ads related to search.

However, some large publishers, such as the New York Times receive a larger share, some have received 100%. So what does this revenue share percentage represent?

As one commenter wrote:

I didn’t get from the article how they came to that 68% figure. Is it an average, mean or mode?

… it may mean that a handful of huge publishers are getting a revenue share of 90%, a fair number of medium publishers are getting 50% and the vast majority of small publishers are getting 20%.

If we don’t get more information about how the 68% and the 51% figures were calculated and about whether all publishers get the same or similar rates, then I will still consider that I have no idea what my effective rev share is.

Well said.

Anticipating the meaningless nature of the disclosure, Mr Mohan urged Adsense partners to “focus on the total revenue generated from your site, rather than just revenue share, which can be misleading.” Misleading it certainly is. How this improves transparency is a mystery — It’s as clear as mud. However, Google watchers applauded.

Jeff Jarvis from BuzzMachine took credit for pressuring Google to reveal the numbers. And John Battelle indicated it was a good split since “as recently as two years ago, sources I know to be extremely reliable were actively negotiating with Google to get a 65% cut.

Both are authors of books about Google.

Because the accounting isn’t clear, a key question is if Google can vary payouts in order to meet Wall Street expectations, a form of cookie jar accounting. Small variations in publisher payouts could have a large effect on its share price if GOOG exceeds Wall Street quarterly estimates.

For example:

Google Cuts Payments to Publishing Partners by $24m, Beats Analyst Estimates - SVW

Is GOOG Shafting Its AdSense Partners? - SVW

Mr Mohan says the percentage Google keeps for itself hasn’t changed since 2005 for search, and 2003 for content. However, Google has considerable lee way within those figures.

The revenue share it keeps for itself is used to cover costs comprising of expenses and investments in AdSense. Mr Mohan admits that these costs “can vary significantly,” which means Google could choose to reduce investments in AdSense over the short term in order to boost income and meet or beat financial targets.

Also, Google has been actively trying to shift revenues to its own web properties so that it can keep 100% of ad revenues.

When Google went public in 2004 its revenues were equally split 50/50 between it’s own online properties and third party sites. Google’s own sites now account for 66% of total revenues while third-party sites generated just 30% of total revenues — a 40% reduction.

The quickest way for Google to boost profits is by further reducing the percentage of total revenues paid out to its AdSense partners.

It’s a strange business when you can make more money by competing against your publishing partners. Where’s the incentive to improve payouts and the AdSense platform?

- - -


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Tom Foremski reports on the business and culture of Silicon Valley at the intersection of technology and media.

Disclosure

Tom Foremski

Tom Foremski is the editor and publisher of Silicon Valley Watcher and Silicon Valley Watch. Tibco Software is an advertiser.

Biography

Tom Foremski

In May 2004, Tom Foremski became the first journalist to leave a major newspaper, the Financial Times, to make a living as a full-time journalist blogger. He writes the popular news blog Silicon Valley Watcher--reporting on the business of Silicon Valley.

Tom arrived in San Francisco in 1984, and has covered US technology markets for leading computer journals around the world.

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RE: Google transparency on advertising revenues is as clear as mud...
JACOBSONR 14th Oct
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0 Votes
+ -
Google is NOT the only problem here, it's ALL advertising media. Seems they're finding more ways to circumvent "No Pop-ups".

THIS irritates me to the HILT!
Not sure about you but I pay for my bandwidth. When I want Pop-ups stopped, I WANT POP-UPS STOPPED! Now we have this new double-underlined advertisement link krap. OH GOOD GOLLIES!!!

As far as I?m concerned if someone can bypass that request, THEY can pay for my bandwidth.
Crotchety? NOOOoooooOOOOO, today?s world is SO GOLL-DANG FULL of advertisements one CANNOT enjoy the programs they're supposed to be paying for. I feel sorry for those folks who work #2 & #3 shifts. To them TV is nothing but "Paid Programming" aka; PRE-PAID COMMERCIALS. Someone?s getting paid twice!

Me, venting. H3LL YAH!
(Sgt. Carter) "I can't hear you!"
?IF? you like repetitive, childish, mind-numbing, condescendent commercials... ignore this man behind the curtain.
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Google is NOT the only problem here, it's ALL advertising media. Seems they're finding more ways to circumvent "No Pop-ups".

THIS irritates me to the HILT!
Not sure about you but I pay for my bandwidth. When I want Pop-ups stopped, I WANT POP-UPS STOPPED! Now we have this new double-underlined advertisement link krap. OH GOOD GOLLIES!!!

As far as I?m concerned if someone can bypass that request, THEY can pay for my bandwidth.
Crotchety? NOOOoooooOOOOO, today?s world is SO GOLL-DANG FULL of advertisements one CANNOT enjoy the programs they're supposed to be paying for. I feel sorry for those folks who work #2 & #3 shifts. To them TV is nothing but "Paid Programming" aka; PRE-PAID COMMERCIALS. Someone?s getting paid twice!

Me, venting. H3LL YAH!
(Sgt. Carter) "I can't hear you!"
?IF? you like repetitive, childish, mind-numbing, condescendent commercials... ignore this man behind the curtain.
0 Votes
+ -
Too many ads everywhere. I would like to see those pharmaceutical ads go away. Give the symptoms, then a cure... Of course the symptoms are those that most people have at some point. Not a big fan of anti-depressants either, life can be and sometimes is depressing.

Now ads all over the internet, now more of a virus than a simple advertisement. Mouse-over something and a window blocks your view, now search for the close button to continue the task... Darn, moused-over by accident. And the double-underline. Nothing like an obstacle course on the web page.

Google TV Anyone?
0 Votes
+ -
Oh yeah?
BIGELLOW 25th May 2010
And by mud you mean clear water, right? I thought they were absolutely clear. It was only the paranoia of people assuming this was an average or mean that muddied the waters.

Fortunately, Google immediately posted a follow-up to these concerns by pointing out that the 68 percent represents the usual share with most publishers. In some cases, they negotiate a different amount, and those publishers will know the amount. For everyone else, the share is 68 percent... this is not an average or a mean... it's the default share, unless you've negotiated otherwise.

It's too bad you didn't wait a little longer to see this follow-up before posting this huge article for nothing.
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