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Google just disclosed the amount of money given to AdSense partners
substantial increase from the previous quarter
elsewhen




msg:3238791
 9:13 pm on Jan 31, 2007 (gmt 0)

from the press release:

Traffic Acquisition Costs, the portion of revenues shared with Google's partners, increased to $976 million in the fourth quarter of 2006. This compares to TAC of $825 million in the third quarter.

 

mattg3




msg:3243188
 4:16 pm on Feb 5, 2007 (gmt 0)

I dunno:

it seems to be pretty simple

if in the year 2005 there was 1 adsense publisher that got 75% of $1000 s/he got $750. If in the next year there were 2 adsense publishers that got 75% of that $1000 dollars someone or both gets less.

The increase was from $825 million to $976 million = 151 million

That's about 1.1830 more money in the system. If on average everyone got more or less depends simply on the question if Google could aquire 1.1830 the amount of adsense publishers in that quarter. If they got more new publishers than everyone got less if they got less then we all get more on _average_.

If some of above money is diverted to three major publishers, we substract that money and the publishers and recalculate.

As I guess no one knows the variations in the number of normal publishers the whole thing is the usual Google black box

[edited by: mattg3 at 4:40 pm (utc) on Feb. 5, 2007]

oddsod




msg:3243190
 4:17 pm on Feb 5, 2007 (gmt 0)

mb, I'll give you one example: Google's deal with the Fox Interactive Media Network (including myspace) includes paying $900 million over three years [theregister.co.uk]. That Fox could negotiate a fixed fee deal shows what a strong bargaining position they were in. Google was willing to bend over backwards to prevent myspace falling into Yahoo's or Microsoft's clutches. By all analysts' accounts that inventory was overpriced and Google was paying well over the odds.

On a quarterly basis that's $75 million out of Google TAC of $916 million going to pay for real estate (rather than results) to Fox alone. Now, because that's a fixed rate deal even Google doesn't know in advance whether they're paying Fox 20% of the revenue generated on Fox properties ... or 200%. They've got to take the $75 million out before they calculate how much they are paying you (and they've got to take out other multi-million dollar chunks for other sweetheart deals). Bear in mind that the consistent 75% of payout isn't a coincidence; it's a managed figure, Google is constantly making adjustments so that it's pans out to circa 75-76% by the end of the quarter. The only way they can do it is by factoring in a new variable into their algorithm that cuts what you get paid.... if the sweetheart deals turn out to be underperforming. And, I'll admit, vice versa.

In other words, your interpretation is spot on. Granted, we have no proof that the Google overpaid for the sweetheart deals. But, if they did then that money has to come from somewhere. And that's from the rest of the publisher network.

Now, I'm not moaning that my Adsense payments are down. On the contrary I make a healthy six figure sum from various Adsense accounts (in Ltd company names) and have more than one "UPS" club account. I do also have a range of sites on almost every subject you can think of. In that respect I'm in a privileged position when it comes to stats gathering and analysing. Now, let me put this to you: If you have to make cuts in general publisher payments to finance your sweetheart deals would you
a) Cut percentages across the board
b) Cut percentages from those sites least likely to leave your network

The smart business decision would be b. Assume you have the toolbar data, SERPs click tracking data, Google Analytics data, previous figures for who leaves when payout drops, etc., etc. Would you cut payouts to big sites in the travel sector (who can easily find other ways to monetise their sites) or to those sectors where you've noticed there is a higher threshold of pain before publishers replace Adsense ads?

rbacal




msg:3243217
 4:46 pm on Feb 5, 2007 (gmt 0)

sigh
mb, I'll give you one example: Google's deal with the Fox Interactive Media Network (including myspace) includes paying $900 million over three years.

I'm kind of wondering why you left out the part about the payment being conditional on traffic (and other undisclosed factors). It kind of makes a difference, particularly if those undisclosed factors have to do with revenue targets for google so that in fact if Fox underperforms, they may not receive what you think they will.

Anyway, reading everyone's (actually just a few people) speculating, guessing, and filling in blanks with almost no factual information is entertaining.

The number of assumptions being made that masquerade as facts is pretty startling.

oddsod




msg:3243226
 4:50 pm on Feb 5, 2007 (gmt 0)

I'm kind of wondering why you left out the part about the payment being conditional on traffic (and other undisclosed factors)

Because they are not relevant. It would be standard in a contract of this nature to put some failsafes into place in case the young/untested myspace goes badly pear shaped and collapses. Think about it - traffic conditions - it's like paying you when someone doesn't click on the ads on your site i.e. Google is paying these big boys for impressions (though Google doesn't get paid for impressions). If the payments were going to be put through the smartpricing algo wouldn't performance have featured in the press release? ;)

they may not receive what you think they will.

Yahoo was willing to overpay. Microsoft was willing to overpay. Google didn't win by being willing to underpay. Read what the analysts had to say about the deal.

All this points to the fact that Google is going to continue to adjust the variables to favor their bottom line

I'm in complete agreement with that. And I don't see what's wrong with it. Google is, after all, a business. It beats me why others argue that Google would act against its own financial interests.

justageek




msg:3243333
 6:13 pm on Feb 5, 2007 (gmt 0)

Just so everyone is on the same page about the gauranteed payouts and I don't have to read about how entertaining it is for some folks who think others do not speak about facts. Here is the complete blurb on how money has been lost straight from Google (10Q) without edit:

Payments to certain of our Google Network members have exceeded the related fees we receive from our advertisers.

We are obligated under certain agreements to make non-cancelable guaranteed minimum revenue share payments to Google Network members based on their achieving defined performance terms, such as number of search queries or advertisements displayed. In these agreements, we promise to make these minimum payments to the Google Network member for a pre-negotiated period of time, typically from three months to a year or more. At September 30, 2006, our aggregate outstanding non-cancelable guaranteed minimum revenue share commitments totaled $1.05 billion through 2010 compared to $234.3 million at December 31, 2005. These amounts include our obligations under our August 2006 agreement with News Corporation’s Fox Interactive Media to make non-cancelable guaranteed minimum revenue share payments of $900 million based on Fox Interactive Media achieving certain traffic and other commitments. These amounts do not include payments related to toolbar and other product distribution arrangements as these arrangements do not include guaranteed minimum commitments. See the disclosure under “Contractual Obligations” in Part I, Item 2 of this report for additional information regarding our contractual obligations. It is difficult to forecast with certainty the fees that we will earn under agreements with guarantees, and sometimes the fees we earn fall short of the guaranteed minimum revenue share payment amounts. Also, increasing competition for arrangements with web sites that are potential Google Network members could result in our entering into more agreements which include these non-cancelable guaranteed minimum revenue share payments and under which such payments exceed the fees we receive from advertisers whose ads we place on those Google Network member sites.

JAG

europeforvisitors




msg:3243365
 6:44 pm on Feb 5, 2007 (gmt 0)

All this uncertainty leads me to thinking that saying "Google paid out just over 76% of AdSense revenues to AdSense partners" could be easily mis-interpreted as "Google paid out just over 76% of AdSense revenues to all AdSense partners".

"Google paid out just over 76% of AdSense revenues to AdSense partners" is a clear, straightforward, accurate statement of fact. The fact that some people may read other things into it (or may choose to misrepresent it) doesn't make the statement untrue.

martinibuster




msg:3243378
 6:54 pm on Feb 5, 2007 (gmt 0)

JAG, there is no question there are sweetheart deals. For those who are questioning whether they exist or not, I hope that settles it.

They've got to take the $75 million out before they calculate how much they are paying you (and they've got to take out other multi-million dollar chunks for other sweetheart deals).

So do you have confirmation that the money being used to pay off Fox or AOL is coming from our clicks?

Why wouldn't it come out of income received from AdWords? Or, why wouldn't it come out of income earned from Google's share of the AdSense click?

rbacal




msg:3243412
 7:14 pm on Feb 5, 2007 (gmt 0)

[quote]Read what the analysts had to say about the deal. [/quote

The one that I found most amusing was the person who predicted that google would earn DOUBLE their investment of 900 Million. That individual, along with the other "analysts" you hint at are simply speculating. I give almost no credence to any of them but rely on Nostradamus, instead.

Anyway, I'm looking forward to the fox deal working out, and seeing my "revenue share" skyrocket. Going out to order my JAG right now in anticipation.

You ARE speculating and interpreting. Luckily the whole subject has very little implication for any of us since it's all beyond our control. As such it's just plain old entertainment, and I hope people really don't take all these "analyses" too seriously.

oddsod




msg:3243414
 7:16 pm on Feb 5, 2007 (gmt 0)

I don't understand your point, mb.

This is what I understand: All the money Google takes in Adwords is distributed thus:

25% to Google (non-negotiable)
hundreds of millions to sweetheart deals (non-negotiable)
balance is paid to you and me (and EFV)

Guess where the flexibility is if the sweetheart deals perform as poorly as Google suggests they could ;)

justageek




msg:3243419
 7:23 pm on Feb 5, 2007 (gmt 0)

For those who are questioning whether they exist or not, I hope that settles it.

Let's hope so. But it was also to confirm that a loss took place and is not speculation.

Why wouldn't it come out of income received from AdWords?

I would think that as a public company they'd have a few folks up in arms if they are reporting an income line that really has income coming from somewhere else.

Or, why wouldn't it come out of income earned from Google's share of the AdSense click?

Maybe it could. It is just amazing though how Google can post a loss with million dollar deals but still keep the payout percentage about the same each reporting period while cranking out a profit.

JAG

martinibuster




msg:3243454
 7:59 pm on Feb 5, 2007 (gmt 0)

25% to Google (non-negotiable)
hundreds of millions to sweetheart deals (non-negotiable)

Well, why couldn't the money for the sweetheart deals be coming out of the 25% that goes to Google?

Or, why couldn't the money to pay for the sweetheart deals be coming from the huge pot of money coming from Search revenue?

Is there a definitive official statement somewhere that Google sets aside a portion of my click revenue (not Google's click revenue) to give to a third party not involved in that click?

BigDave




msg:3243561
 9:41 pm on Feb 5, 2007 (gmt 0)

The VAST MAJORITY of the money going to the sweetheart deals is going to come from the advertisers on those networks that pay for the clicks.

We don't have to subtract the $75 million from the $976 million, because there is no way that there are zero clicks on the MySpace ads. There is also little chance that the payments are spread equally across the entire timeframe of the deal. The current minimums are probably something more like $40 million.

So lets look at some figures (that are pure speculation) to help understand how this might affect things. Even if they decide that the rest of us publishers are going to bear the brunt of these deals.

Oddsod suggests that it works like this (in millions)
$976 - $75 = $901 to share out to the rest of us. A reduction of 7.7%

But it is far more likely to be something like
$976 - ($40 (guaranteed) - $30 (actual)) = $966 to share. A reduction of 1%.

Personally, I'm betting that their losses are less than that, and that the numbers could easily disappear into the noise on either Google's or our side of the split. Blaming the 50% drops in payments on the sweetheart deals alone simply is not supported by the numbers. Not even oddsod's numbers.

[edited by: BigDave at 9:43 pm (utc) on Feb. 5, 2007]

mzanzig




msg:3243856
 6:30 am on Feb 6, 2007 (gmt 0)

Well, well, it all depends on the number of sweetheart deals, doesn't it? When the YouTube deal was announced, for example, it sprang to my mind how interesting this may be. (YouTube was at that time heavily using Adsense for monetization, apparently a bad choice because they seemed to have zillions of untargeted ads for some strange reason.)

Google could, for example, give YouTube a 150% revenue share. In this case, the money would stay "in da house" while the overall share (all publishers) could still be announced to be 76%, with the small publishers getting a smaller revenue share, of course.

The main problem is that we do not have enough figures to understand what is happening, so everything is speculation here.

And, as mentioned before, there is little we can do anyway, even if we had the right figures.

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