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|Adsense predictions for 2007|
It's probably a good time to anticipate what might be coming in adsense in 2007. If we can have an intelligent discussion that doesn't get hijacked, it would be interesting to hear what people anticipate for 2007. I'll post a few of mine.
1) Continuing trend from 2006, advertiser behavior will continue to change pushing DOWN ad prices, but overall ad expenditures will increase.
2) Continuing trend also that it will continue to become more and more difficult for new adsense publishers to do well (I believe Jane Doe mentioned this elsewhere).
3) Marginal quality sites will become less and less profitable.
4) People who have done well with marginal sites that cater to adsense and not users will have a really really bad year. Without proper alternate income streams, some of those people who have done ok so far will crash and burn.
5) Any effects of competition from YPN/MSN won't appear until at least mid 2007, but probably won't be much of a factor in 2007.
6) Tweaking and testing will be less and less effective over time. It will be clearer that the best way to do well over time in adsense is to build good sites, follow the general guidelines google supplies, understand google's business model, and follow the spirit of their suggestions.
Overall, even better sites will earn less per click, while poorer sites will collapse. That's probably not a bad thing for the long term. Tweaking, putting images to deceive, all that jazz will simply end up as less and less effective.
Advertiser behavior has definitely changed this year, which is expected as the industry matures. The shakeout on the ad side started this year (2006), just as shakeouts occurred in other internet ads earlier on (e.g. banner ads). The effects of that trend will become obvious in 2007
Add yours? (Please try not to hijack this thread. Stick with your predictions and that would be real good)
Freedom, there's nothing "contrarian" about understanding--and expounding--basic principles of advertising.
Two more quick observations:
1) The highest-traffic sites don't necessarily have the highest CPMs/eCPMs. (Topix.net and MySpace being two obvious cases in point.)
2) You used the example of Wal-Mart undercutting mom-and-pop businesses with lower prices. That may be a relevant example in the retail world, but it isn't how advertising works. The NATIONAL ENQUIRER may charge lower rates than THE WALL STREET JOURNAL or GOURMET, but that's irrelevant to the advertiser who's selling high-end financial services or kitchenware and needs to reach institutional investors or well-heeled cooking enthusiasts.
I agree that not all publishers will prosper equally from AdSense as the "content network" evolves, and some will be badly hurt. Ultimately, advertising pricing--and earnings--are about the ability to deliver quality audiences to advertisers. As time goes by, it wil become tougher to make money just by slapping up a bunch of pages with AdSense ads on them, and that's probably a good thing for advertisers, for Web users, and for AdSense participants who have a solid grasp of advertising and publishing.
While making predictions for 2007, let's reflect on the predictions for 2006 from the following thread and see which ones happened :)
>predictions for 2006
I miss 21_blue, WW lost a great person when he left.
Yes, EFV, I understand that. I was in the newspaper business for a long time and I've grasped the concept of a targeted audience. I didn't mention it before because we were discussing the big picture.
But you mentioned that competition could help to keep publisher earnings up and I said that it's possible, but that competition could also work the other way. I never said what you implied in the previous post that Google was aiming to be the lowest common denominator of ad networks, all I said before you hit the contrarian button is that competition can work both ways for publishers. It could help them or it could hurt them.
And in the case of the small publisher, it's going to hit them hard, I believe.
The only real way that income could go up for publishers is if there was more demand then there is supply. If there is more supply then demand, prices go down. That's a basic rule of economics and it applies to adsense and whatever sector the publisher is in. Some sectors of the internet economy will experience a higher demand then others, and the bigger publishers are more likely to benefit the majority of the time.
As for display ads, my personal belief, which I stated it was, is that they don't work as well as text ads. That's my personal belief. Okay? And I don't give a crap what some big research firm says. Maybe display ads will grow, I don't know, I just don't like them and don't think they work as well, personally. Text ads have always worked better for me on both sides: as an advertiser and a publisher. JMO.
|Freedom, there's nothing "contrarian" about understanding--and expounding--basic principles of advertising. |
I never brought up targeted advertising or publisher quality so don't talk down to me like I don't understand advertising just because you love to be a contrarian. All I said was:
1. Competition can work both ways for publishers.
2. Small publishers will start to get squeezed out.
3. Personally, I'm anti-display ads and I don't necessarily trust what some big hot shot research firm says. Most times, business and economic prognosticators never get it right. They get it wrong more then they get it right.
4. The only real way for prices to go up for publishers is if demand exceeds supply (and I don't see that happening in most sectors with the 2007 economic picture looking the way it is).
|The only real way for prices to go up for publishers is if demand exceeds supply |
Again, whether prices (and earnings) go up or down will depend on the specific case. I agree that many small (and some not-so-small) publishers will be hurt, and there's nothing wrong with that: AdSense isn't a welfare program; it's an ad network, and ultimately the rewards should go to those who deliver quality traffic to advertisers.
Also, some publishers will be hurt for reasons beyond their control, but others will be hurt because they've made poor editorial and business decisions (such as optimizing for CTR at the expense of conversions or developing sites that offer little value to users and advertisers).
As for display advertising, you and I will have to agree to disagree. (Too bad we aren't allowed to talk about specific sites or sectors; you might be surprised.)
True, true and agreed.
|The only real way that income could go up for publishers is if there was more demand then there is supply. |
I know you are summarizing something complicated, but supply and demand in this context is really really complicated. What's more important actually is the PERCEIVED VALUE advertisers see in terms of their ads (ROI, if you like). Of course that effects demand, but simple supply issues seem to me to be less important.
Talking supply and demand is too general anyway, since we have to specify supply of what, demand for what, by whom, in what sectors, and so on.
In talking about small publishers, another factor is whether google manages to make it easy to site target. Obviously that's something they want to do, but they aren't near there yet. This is another factor that will affect demand for ads -- ease of use.
If anything, I'd say that I'd say that demand is much more important than supply in this business.
As for display ads, I don't know where they are going, but on the three major ad serving networks (display ads) that I am part of, there's no question that advertisers have been paying more throughout 2006.
|Talking supply and demand is too general anyway, since we have to specify supply of what, demand for what, by whom, in what sectors, and so on. |
Great point. We have to remember that certain types of advertisers are culturally biased toward display ads, for example, and an increase in demand by those advertisers (e.g., big corporate advertisers represented by Madison Avenue ad agencies) is likely to be on the display-ad side.
The advertisers' margins also come into play. In some sectors, advertisers will be bidding for leads that can be turned into big-ticket sales or business relationships. In others, bidders will tend to be affiliate sites, click arbitrageurs, mom-or-pop businesses that sell inexpensive widgets, and other low-margin advertisers. If the latter get squeezed, their pain is likely to be shared by publishers who depend heavily on their ads for revenue.
One problem for the AdSense network (and for publishers who depend on AdSense) is that attempts to expand beyond PPC text ads don't appear to have been very fruitful. Google may be able to sell video ads on YouTube, but that won't benefit rank-and-file AdSense publishers, for whom PPC text ads (and, to a lesser extent, site-targeted CPM ads) are pretty much the only game in town.
Well, as "anti-display" ad that I am I have to agree with EFV that for some big firms, it's not right to run only tiny text ads, and they have to have display ads to keep in line with their image. Still, some large corps run text, so it's all a matter of who's buying.
As for rbacal comment on Perceived Value, I'm not quite sure exactly which way you are going on that comment, so I'll stand back and not say anything except to point out that in general, "Perceived Value" has brought down more economies, destroyed more wealth, caused more bubbles, then anything else except fiat money and government confiscation.
Perceived value never, ever lasts and usually gives to a steep drop in value, or a steady decline. (In general, like the junk bond bubble, the internet bubble, the stock market bubble, and the current real estate bubble).
But that's a whole other topic. Related tho, in a small way, is my one big adsense prediction (and the same one that just about every single economist, fund manager, investment analyst and government official has), my prediction which I share with everyone else who looks at the global economy --- is that the dollar is going down, down, down and down some more. Which has been a hot topic on this board once in awhile.
I definetely predict we'll see more "$$ is down and I'm not earning as much" threads. I'm an American currenlty living in Europe (for 3 more weeks at least) and over the 3 years I've been here, the USD has dropped against the local currency by more then 22 percent. And the local one has a history of being a basket case.
For those that know about it, if the dollar drops below the US Dollar Index resistance level of .80, then it's in huge trouble. Nothing Google could do (except terminating their account) will hurt foreign publishers more then when the dollar drops below .80 on the USDI (Google search US Dollar Index)
Americans have no idea their almighty USD is in serious trouble. That falling dollar is just not reported over there on the nightly news and the average American has no idea what's going on or where it could lead to.
I hope that didn't get off topic for you rbacal, but my falling dollar prediction will probably come true and it does affect foreign publishers.
|As for rbacal comment on Perceived Value, I'm not quite sure exactly which way you are going on that comment, so I'll stand back and not say anything except to point out that in general, "Perceived Value" has brought down more economies, destroyed more wealth, caused more bubbles, then anything else except fiat money and government confiscation. |
Perceived value never, ever lasts and usually gives to a steep drop in value, or a steady decline. (In general, like the junk bond bubble, the internet bubble, the stock market bubble, and the current real estate bubble).
It's too big a topic for this thread to explore in detail, but the value of many things is defined psychologically, rather than in hard numeric terms. Think stocks. The market price for a particular stock often has little relationship to any indicators.
Or a better example is the "value" of advertising prior to the last bubble burst. The perceived value (or anticipatory value), and the ultimate bottom line documentable value ended up completely different, so the ultimate outcome was that perceived value crashed.
THAT's applicable here, because advertiser behavior is dictated NOT by actual ROI per se, but the perception of value, which may or may not be tied to ROI. Often it's the anticipated perceived value, too, and not the present documentable value.
We're at about the same point in life cycle of adsense as we were with the bubble burst (lots of differences though). Advertiser are altering their behavior to bring their perceived value more inline with the documentable actual ROI. Typically you'll get a big rush or boom, and then fall back. Which is what I think is and will continue to happen.
Total ad dollars won't necessarily drop, but bids (CPC - what advertisers are willing to pay for each click) will.
You may well be right about the effect on the falling dollar on non-US publishers and only time will tell. I know that in my case the real value of returns has fallen due to the exchange rate.
But non-US advertisers have their budgets set in non-US currencies so a cheaper dollar could result in more advertising. It's also possible that Adwords could grow in Europe as I suspect it's less developed there than in the US. At least that's what I'm hoping. :)
|You may well be right about the effect on the falling dollar on non-US publishers and only time will tell. I know that in my case the real value of returns has fallen due to the exchange rate. |
I'm in Canada, and it's not been pleasant. Unfortunately, our expenses are so low that we don't benefit much on the expenditure side, particularly after you calculate taxes.
To bring it back to topic. If the dollar drops significantly in 2007, then we're all going to be in bad shape, regardless of industry, online or off, etc. In other words if the economy tanks, there's little protection if it occurs on a broad scale. So, frankly, I don't worry about it much. I don't think the fall will be as large as we've already got, anyway.
If we're talking real long term about economy, I think the REAL critical years will be 2008-2009, and the election results.
The bad years are coming as all the baby boomers (in the USA and Europe) retire, pull their money out of the stock market and demand all those huge welfare programs they voted for themselves back in the 70s, 80s, and 90s. There are simply just not enough young people, including all the legal and illegal immigrants they let in, to pay for those huge social benefits and pensions (if illegals were to even pay taxes).
It's too long to explain all now, but it something I've been studying for 3 years and I can tell you, it's going to be incredibly bad.
|To bring it back to topic. If the dollar drops significantly in 2007, then we're all going to be in bad shape, regardless of industry, online or off, etc. In other words if the economy tanks, there's little protection if it occurs on a broad scale. So, frankly, I don't worry about it much. I don't think the fall will be as large as we've already got, anyway. |
To put into perspective, the S&P500 has risen by 11 percent this year, but in Euro terms, it has only risen .2.
Actually there is a commodity type hedge against a falling dollar but I got so much hate mail last time I brough it up that I won't make that mistake again. But I can say I told you so as that investment is up 40 percent since then, and the dollar has fallen from $1.23 to $1.32 since I discussed it last Jan.
Whew, you want to talk about some people PO'd to hear me talk bad about the dollar and US economy...Pure hate posts and hate mail.
As rbacal said, perceive value does play a part, but it's a part that usually come back around to bite one in the ass, IMO. However, I just hope advertisers and the ad networks are playing it smarter this time around as rbacal writes: "Advertiser are altering their behavior to bring their perceived value more inline with the documentable actual ROI."
But you know, even if all these pessimistic or optimistic or realistic predictions come true, what can a webmaster really do about it? = Just keep working, producing and try to stay one step ahead. Like I said earlier, if I can get the amount pages out of that $20,000 I'm willing to spend, 2007 is going to be a great year with all the work, capital investment and calculated risk I'm willing to take - even with the potential downside factor of things I don't control.
So, in short, just go back to work. :-)
[edited by: Freedom at 9:15 pm (utc) on Dec. 23, 2006]
|But you know, even if all these pessimistic or optimistic or realistic predictions come true, what can a webmaster really do about it? = Just keep working, producing and try to stay one step ahead. |
Multiple revenue sources can help, too, especially if you have a way to earn revenue in more than one currency.
The dollar issue brings up an interesting question: How will the advertiser mix be affected if advertisers in the UK, the euro zone, etc. find it cheaper to buy dollar-denominated ads?
Getting back to the topic of AdSense predictions for 2007, here's another bit of wild speculation (really more of a "what if" scenario): What if Google were to use search data on the AdSense side, and what if the "BigDaddy" infrastructure that was rolled out in 2006 was designed (in part) to facilitate such slicing and dicing of data?
Consider just one possibility: that Google might adjust the payout percentage to reflect the amount of value added by the publisher. Let's say that Paula Publisher has a site with very little stickiness that exists primarily to receive Google Search traffic and turn that traffic into AdSense clicks. (Sort of like click arbitrage, but without buying ads.) Wouldn't it be reasonable for Google to keep a larger-than-average share of that publisher's earnings when calculating the revenue split?
My advertising and hosting expenses, and my advertising and hosting income, and the currencies of the people whose ads are appearing on my sites though AS or other networks, are in a mixture of USD, EUR, GBP, and other currencies. I think that given my diversity of users, I'm reasonably hedged against even quite large currency movements.
Example: I've just had to notch *down* my CPM adgroup default rate on one AW campaign because what even a few weeks ago was a miserly amount had become a little over-generous. Thus a falling USD relative to my home GBP *reduced* some costs, along with the falling USD-denominated costs of all my hosting outside the UK. On the other hand, since a significant chunk of my advertisers are US-based, I expect their ad bids to drop in GBP terms from the weakening USD/GBP FX rate and a weakening US economy.
Three days a week I sit on a trading floor and I can tell you that even the economists/quants/traders around me seem a little taken aback by the size of the fall of USD, though to me inward-looking and protectionist policies would seem to be likely to have that effect WHATEVER your declared political stance, just as a matter of economic/financial necessity.
Last time the USD was this low relative to GBP I made a nice little sideline importing second-hand computer equipment and selling it to the new ISPs in the UK amongst others. And note that it was 1USD=1GBP quite close in time to that, so wild things can happen quickly...
[edited by: DamonHD at 10:37 pm (utc) on Dec. 23, 2006]
My 2007 prediction for Adsense:
The Google CPA program is released full scale, as a result many publishers will see a sharp decrease in revenues as major spend players pull adverts out of the CPC content network and move dollars to the CPA network.
As a direct result of this action the Adsense standard CPC network will implode on a EPC basis for a lion share of publishers.
This will once and for all settle the question of who has converting traffic and who doesnt. Those with traffic that converts will see there income swell to incredible levels and many millionaires will be made overnight, those who do not will watch there income plummet as they fight with a ever increasing pool of less desireable advertisers for ever shrinking CPC dollars.
Not all advertisers are trying to sell something.
Not all advertising has a meaningful CPA or ROI, eg for museums, pro-bono, and government information.
Not all advertising has a sale at the end, eg branding.
|Not all advertisers are trying to sell something. |
Or even if they are selling something, they aren't selling it via e-commerce transactions--they're using ads to obtain leads that can be developed into sales, bids, contracts, business relationships, etc. offline.
Most offline advertising isn't used to generate mail-order sales, so why should anyone assume that online advertising exists only to drive e-commerce transactions?
Bottom line: CPA has its place (and it can be very profitable for publishers in certain sectors), but it's a small part of the overall advertising picture, and in most cases, it isn't a practical substitute for CPC or CPM advertising.
|Americans have no idea their almighty USD is in serious trouble. That falling dollar is just not reported over there on the nightly news and the average American has no idea what's going on or where it could lead to. |
However, I've seen it reported regularly on US business news (Bloomberg, CNBC, etc.).
|Most offline advertising isn't used to generate mail-order sales, so why should anyone assume that online advertising exists only to drive e-commerce transactions? |
Possibly because online advertising (especially CPC) has been sold (as a concept) to advertisers that way.
|However, I've seen it reported regularly on US business news (Bloomberg, CNBC, etc.). |
Yes, but I'm pretty sure they don't grasp what it really means and what the possible negative outcomes are.
|Possibly because online advertising (especially CPC) has been sold (as a concept) to advertisers that way. |
If you look back to when Google introduced conversion tracking for CPC ads, it defined "conversion" very broadly--i.e., not only as a sale, but also as a registration, viewing of a certain number of pages, inquiry, or whatever else the advertiser might mean by "conversion." What's more, many AdSense advertisers historically have NOT used AdSense (or AdWords) for e-commerce transactions: They've used AdSense as a way to obtain leads for their offline businesses.
This does bring up an interesting thought: To what extent does the proliferation of low-margin e-commerce, affiliate sites, and MFAs discourage participation by offline businesses that could afford to bid more than, say, the guy who's trying to profit from the spread between CPC payments and AdSense earnings? And to what extent are such potential AdWords/AdSense customers discouraged by the complexity (indeed, the increasing complexity) of buying Google CPC ads? Will Google find a way to reach the larger and less technically-astute mainstream advertising market?
option to choose transparent background and/or border.
ok, here are my predictions:
- we will experience web bubble 2.0 in full effect. since it has been mentioned, "percieved value" is a good headword in this connection. in terms of massive discrepancy between perceived (hype) and real (substance) values. however, massively overestimated and in no way monetary founded values of some 2.0 websites won't affect the normal publisher in his daily work anyhow. unless he's one of the few who has the chance to sell his own blown up project for a ridiculously high price (party like it's 2007). but maybe we can participate in terms of realizing higher prices for certain website marketing strategies.
- we will continue to see people who overestimate the criminal threat to the system and write it off once again. of course, the threat is real and will get bigger, because it will be even more difficult for the masses of incompetent and incapable people to legally achieve respectable adsense earings in 2007. survivors will be - as ever - the "good" publishers with long term ethical orientation
- we will continue to see people hijacking forums and proclaim cpa as the be-all and end-all (look at this very thread) whereas cpm for image/movie banner campaigns will be the real gainer in 2007. apart from that, no need for google to get insane and destroy its core business and cash cow, that is since all those years: cpc.
- we will see yahoo and msn now going into the fourth year of being incapable of getting international with their competitive products. that's just plainly embarrassing and righly yet only receiving sarcasm from the publisher community. google monopoly continues to rule this market.
- unlike most others, i predict network-wide aggregated epc to go up. supply and demand in many sectors will represent as limited amount of ad space opposing higher expenses for internet advertising. the direction of the preceding years will slowly turn around to the benefit of quality content publishers. most of them that combine a serious amount of traffic will have noticed by now that adsense is the way to go in terms of monetizing a website. so this area is saturated, property of advertising space is divided as adsense is already installed on the relevant websites. now let the fight for the limited user interest and attention with strongly increasing online spendings begin.
|unlike most others, i predict network-wide aggregated epc to go up. supply and demand in many sectors will represent as limited amount of ad space opposing higher expenses for internet advertising. the direction of the preceding years will slowly turn around to the benefit of quality content publishers. |
I think you may be right if Google can differentiate between "quality content publishers" and everything else. To some extent, this can be done through simple segmentation of the network (i.e., letting advertisers opt in or out of certain types of content such as parked domains and gmail), but differentiating between crapsite.com and usefulsite.com won't be so easy (although using profiles based on search data might help).
I predict that if all stays the same at GG, savvy advertisers will get fed up with the high search competition, cost and poor content network distribution and seek out quality content publishers directly.
|differentiating between crapsite.com and usefulsite.com won't be so easy (although using profiles based on search data might help) |
Many of Google's held patents revolve around this very issue, be it used for search results or setting an estimated site EPC range per topic or page, this is Google's core competency and one of the reasons they are the number 1 search engine. Extrapolating into AdSense quality score as you are suggesting is not only logical, but inevitable if not already in place right now and hiding under the SmartPricing name.
Predications: going down.
- more competition (contextual ads, yahoo, msn, mamma, canoodle and others)
- google needs more money and will pay out less (youtube, copyright infringements etc...)
|more competition ... google needs more money and will pay out less |
But if Google has more competition, won't it have to pay out more (not less) to keep profitable publishers on board?
IMHO, the question of whether AdSense will "go down" or "go up" is academic, because averages are meaningless to individual publishers. In reality, some publishers will do better and others will do worse than they are now, depending on what kind of changes occur.
|But if Google has more competition, won't it have to pay out more (not less) to keep profitable publishers on board? |
Depends on how much is spent on online ads. If the pie continues to grow, G will be more likely to pay more to profitable publishers.
My 2007 thoughts for Adsense
CPA will increase including direct CPA to IP phone ( and the CPA may well be 10 to 20 cost of current CPC )
Additional add unit options will be offered
Google will clamp down heavy on MFA'a
Google will try new type of contextual add matching based on keywords for selected publishers ( possibly news type sites in the beginning )
Y and MSN will still be fluffing around until 2008 when they may become a true competitor for Adsense and they will then cherry pick potential partners which will only effect G bottom line by end 2008
The number of big corporates putting more into adwords / adsense will increase forcing mum and pop to drop out ( good example is the increase of adds from major car manufacturers using adwords / adsense ) through the big advertising agencies ( and landing page Quality Score will only apply to those G wants it to
One realy big player will launch it's new product through Adwords / Adsense creating PR buzz worth far more than any other means ( new car model / new IPOD etc. )
G will increase it's market share of advertising even further and may well decide to increase it's % take very slightly as it no longer needs to buy audience ( Pile it high and sell it cheap untill you dominate market ) ring any bells MS Office etc.
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