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|Anatomy of an EPC Collapse|
Building a List of Causes
This discussion is NOT about Smart Pricing
There are many reasons for an earnings collapse, and it's important to list them. If you cannot diagnose a problem then you cannot cure it. Smart Pricing is not the only cause, so let's make a list of what causes earnings to dive.
- Too much inventory
As more people enter a space, the EPC is going to drop. MFAs in some cases may be a symptom of a niche with inventory that's under strain. MFAs may not be the problem, just the symptom of the underlying problem.
If there are so many publishers that they're cannibalizing inventory by advertising on each others site, then that niche may likely be suffering from too much inventory.
Speaking from experience, this can affect an older site, too. The bottom falls out, it's not smart pricing.
- Wrong idea of what constitutes a normal range.
Too many newbs complain about having been smart priced because their earnings collapsed after their first couple of months. The base amount they're comparing is not large enough if it's only one or three months. If five months out of six you're earning six cents per click, six cents is normal. Twelve cents per click for a month is a newb advertiser that didn't know his content network was turned on.
And this can affect older sites too. As inventory expands we're going to see lower and lower benchmarks for what represents an average EPC. Let's face it, the content network plays second best to the search network, and it may always earn significantly less than what advertisers are paying per click for search.
- Newb advertisers
Newbs can cause prices to go up and stay up until they run out of money. If no one is stepping in to keep up the pace then your EPC is going to collapse.
- Savvy advertisers
Everybody suspects that a contextual click is generally not as good as a search click. Whether that is true or not is besides the point, that's the general perception. As advertisers become smarter they're going to adjust their prices accordingly.
I suspect that all it takes is one or two bidders dropping their bids to cause a collapse and let the air out of a high EPC gravy train. This is not fact, and I admit it. However, this conclusion comes from anecdotal evidence from watching how the same advertisers dominate certain channels makes me aware of how much my EPC is dependent on these advertisers propping up the cost of bidding on my site.
Okay smarty pants... put on those propeller hats. :)
Let's hear what some of you think may be non-smart pricing reasons why EPC can collapse. I'm certain I haven't listed all the non-smartpricing reasons. What else, apart from Smart Pricing, do you think will cause EPC to collapse?
I noticed the account affect about 22 months ago when I switched over to a new corporate account. Changed all the publisher IDs over the course of a day.
Next day and for 1 week the EPC dropped 50%. SAME ADS were showing.
I got scared and switched ID back to original - instantly EPC returned - SAME ADS showing.
Contacted G support and the said essentially nothing and would not admit to a problem.
I ended up switch gradually over a two week time frame and lessened the drop but I think there was a permenant drop of some percent.
Hmmm.. maybe i should switch a few pages back to the personal account just to see what happens...
|Of course, Google can handily hide behind the fact that they refuse to tell publishers how much they pay, which is franky ridiculous. I think it will probably take a legal challenge to get Google to reveal how it calculates publishers earnings before we'll ever know - and that's not likely to happen because people are scared of losing their accounts and livelihoods if they challenge Google. |
I doubt if I'm the only one here who has hypothesized (often) that Google's payout formula isn't a simple percentage. And why should it be? Commissioned sales reps, book authors, etc. are often paid on a sliding scale, and the sliding scale isn't necessarily the same for every person.
As for the idea of a legal challenge, that's a lot more "ridiculous" than Google's being unwilling to stir up a can of worms and make life easier for competitors by publishing its payout formula. Google doesn't promise a specific percentage split: If you think otherwise, read the AdSense Terms & Conditions and Program Policies. What's more, you aren't even being forced to live with those Terms & Conditions or Program Policies if you change your mind: You can pull the AdSense code from your pages and/or quit the program at any time. Book authors would kill for the freedom to take their books elsewhere if they weren't happy with their royalty checks. :-)
|I doubt if I'm the only one here who has hypothesized (often) that Google's payout formula isn't a simple percentage. And why should it be? Commissioned sales reps, book authors, etc. are often paid on a sliding scale, and the sliding scale isn't necessarily the same for every person. |
Firstly, I don't think it's simply a sliding scale. I think it's an algorithm with some level of manual control that allows Google to decide how much to pay any given publisher.
But it's not the 'sliding scale' that's the problem. It's the secrecy. In some countries, it might be considered using unfair trading practices. I could easily see the European Court (for instance) ruling that Google should provide full statistics if challenged.
The current system (whatever that may be) is unfair to publishers and competitors. It's quite possible that Google could give 5% to one publisher and 100% (or more) to another publisher purely to keep competitive ad networks off a site.
And as for commissioned sales reps/authors - do you seriously believe they would even consider entering into an agreement without knowing what percentage they're going to get? They would be insane to do so - and we are insane for letting Google do it to us.
[rant over - for now]
"Firstly, I don't think it's simply a sliding scale. I think it's an algorithm with some level of manual control that allows Google to decide how much to pay any given publisher. "
When Andrew started a thread on this and I also agreed to this hypothesis, we were mostly laughed at, on the forum. So beware of the sarcasm that is going to come your way.
I do believe that only economic and market forces donot determine payouts. There are certainly 'other' unknown non competitive factors at play.
Whoever's speculation on how Google splits the spoils one way or the other does not make any difference, it remains just speculation.
Running the SERPS and their other interests , froogle et al, is fine BUT being in direct competition with their publishers is another thing altogether.
We do seem to get the dregs while the serp advertising gets the cream of the crop. How's that for fair? I personally feel it should not be this way but all I can do about it is nothing.
I enjoy a good earning from Google and I am not putting them down but they really should rethink that position. Partners should work together not compete in order to further the company goals. When Google gets a hit and conversion that knocks someone of us out of earnings that go totally into Googles pocket.
It's not fair but it is, what I think, the real cause of our lowered earnings.
There will need to be a precedent for me to believe that Google is lying and pocketing the money, any one ever caught Google with their pants down?
You want to see a funny thing?
Enter SmartPricing in the search box of the help page in your AdSense account, you'll get:
"Your search -- SmartPricing -- did not match any answers in the AdSense Help Center"
Now I have emails from Google reps where SmartPricing is mentioned, they must have been too busy to include it in the help all that time I guess..
[edited by: Hobbs at 3:57 pm (utc) on Mar. 8, 2007]
I was going to mention SmartPricing, but I remembered (after writing my post) that it's not part of this discussion. Sorry.
While I'm at it though, I should make this point. I don't really care how or why G cuts EPC to publishers. I would just like to see EPC approach previous levels. February of 2007 is not that different than February 2006, not to the extent that I am earning 42% less per click. That's a pretty big drop to assign to any single cause.
If anything, inflation should have made clicks worth more, not less.
[edited by: fearlessrick at 4:40 pm (utc) on Mar. 8, 2007]
I change three nitches, twice a year, to YPN. When I come back to YPN, my earnings skyrocket over what I got with Adsense.
When I come back To Adsense, six months later, my earnings skyrocket over what I had been earning previously at Adsense for those particular nitches, and over what I was making at YPN.
Funny thing... the reason I switch back to Adsense, is for the same reason. Slowly, earnings twindle at YPN.
But, what I have seen in ONE nitch, a very popular nitch on the web, was when Adsense first came out, the earnings were great for well over a year in the nitch. Then, when YPN came out, the top players, all major corporations in the nitch all moved to YPN. Then, after about six months, they left YPN, and didn't go back to Adsense. For that nitch the cpc market crashed.
I've gone from earning $450 a month for that small sector of my earnings to about $30 (on a good month). I used to get $5 clicks, now I get $.05 clicks. This is not any magical formula for publisher share. These advertisers simply pulled out. They are not on my site, others sites, Google search results... nowhere. All that is left are new, small businesess that have come to the web in the same nitch. They don't have the big budget, and they have very little competition to drive up bidding.
However, I have noticed several of those big corporations, once on page 3 or deeper of Google search results (with me way ahead of them), now are on page one in postions 1-3. Looks like they found a better way to spend their money. They beat Google at their own game (and me at mine).
If I was making $450 a month, and other publishers were lining their pockets as well, now much money did they spend collectively at Adwords each month? How much money are they saving now, that the SEO bill has long been paid, and there are no more monthly cpc budgets eating up their profits?
I've had to diversify more and more in order to wittle away at my losses, losses that were for a variety of reasons, to regain my earnings. It has been a rough year of long hours, but we have made considerable headway in the past two and half months. I had just about given up hope after the past November. But, FINALLY, everything we had been doing during the prior year began to pay off. It takes a full year to harvest an ecrop after planting, and only then if you have worked hard and done everything right.
This is but one other explanation for earnings loss by publishers.
|any one ever caught Google with their pants down? |
Yes. The did something 'evil' enough to have several of their internal legal folks involved and to eventually smooth it out and promise never to do what they did again.
Care to elaborate or at least point us in the right direction?
Your post points up what I believe to be a basic flaw in Google and YPN. You say you have to work at it, when these networks are designed to be "plug and play", just put up the code and let the algo do the magic.
It seems that the opposite is true and maybe that's why my EPC has tanked. I have loads of static pages that I don't even look at in a year's time, with Adsense on them. Could there be a penalty, in my case at least, for leaving content alone? Not making changes?
I don't think it's the case, though, because I've heard from others with static pages who say they're pretty steady.
I had static pages for a year. Once a year we modify every page in our network, it is ongoing work, we never stop, just start over. However, some sites are updated heavily, daily, that is what keeps them popular... fresh content.
I have seen over and over that updating pages has made a difference in our earnings. I suggest that those who say differently are simply uninformed.
There are only 200 channels. How can anyone with 10,000 pages tell me or you not updating over 9,000 pages hasn't affected their earnings without channels to prove it?
There can be many reasons that it 'appears' their earnings have not changed negatively, remained the same, or actually increased. Without 10,000 channels to prove that stagnant pages are suffering earnings, it is a moot topic to me.
I pretty much site wide refresh my pages on a site, all at one time. I use my 200 channels to track topics (nitches), not pages or adblocks. So, my 200 pages track my entire network by nitch. I know which topics I do not update, have not updated for an entire year, because my file manager tells me that and which topics have slowly sank for cpc. The facts are there to support the stagnant penalty. But, this is only one reason for earnings decline.
There are many others. Unless you spend a great deal of time each week studying the stats of your business, you can not begin to understand the depth of the problem. There is no one quick answer that explains earnings decline. I myself have have identifed at least a dozen. The only reason I know I have identified them correctly, is because I address them one by one, and see if changes I made in testing, do actually resolve the issue. If the changes made fix a particular problem, none other, then we have correctly identified the problem and located the fix.
But, as stated in the prior post, some things can not be fixed, such as the collapse of a nitch in the cpc market. We just have to add a new nitch, try to target a high paying nitch, and hope it will replace the lost earnings from those companys who out-smarted the system.
|Care to elaborate or at least point us in the right direction? |
Nope...maybe another thread...it might hijack this thread and the only reason I posted was to make sure people don't live in a glass house. Google has done evil (at least once to me) in the past so there is no reason to assume they won't in the future.
I actually would prefer to think they control the EPC collapse. It's just good business for them. I would prefer it since people who don't believe it believe in a supply/demand problem...in which case the collapse will continue as the network expands and the advertiser pool cannot, or is unwilling, to keep up. Everyone but Google will lose until the implosion is complete.
|Running the SERPS and their other interests , froogle et al, is fine BUT being in direct competition with their publishers is another thing altogether. |
This may seem like an obvious question, but why did you sign up with AdSense if that bothered you? Surely you must have noticed those ads on Google SERPs before you submitted your application.
|We do seem to get the dregs while the serp advertising gets the cream of the crop. How's that for fair? |
It seems to me that your beef should be with advertisers who choose to avoid the content network, not with Google (especially since Google has taken any number of steps to encourage advertisers to use the content network).
why is everyone looking for reasons to their ecpm dropping its right in front of you.... look at last years earnings of the company as a whole...
what happens when ebay wants higher stock prices.... they increase fees....
how can g do this? lower publisher payouts... we all took big ecpm hits late last year... yet it was the best quater on record for g. the top adsense sites will increase, but most will decrease
until we get yahoo or someone up to compete with g ...our % will drop, slowly... and will continue to go down...
|It seems to me that your beef should be with advertisers who choose to avoid the content network |
And I'm one of 'em, bigtime. Content must convert in order to make sense for advertisers. I took all my clients out last year - I'm starting to phase them back in, but at MUCH lower CPC; pennies on the dollar. And unless or until it starts to pay off, that's where we're going to stay. I'm sure I'm not the only one.
It's only natural that Google's algo would work better for search than content. A user looking for green widgets is going to get relevant search results alongside relevant ads. The irony is that the very publishers complaining are the green widget content sites right next to the ads.
In other words, and I've been saying this all along, Google has prostituted our sites as search results to their enormous benefit. While we provide the basis for searches, we receive none of the monetary benefit. It's great for advertisers and Google. Not so good for publishers who rank high in the SERPs and as long as the majority of publishers continue not to complain, it's going to remain that way and get even worse.
While I don't believe Google is exactly evil, I equally don't believe they're inherently "good."
|It seems to me that your beef should be with advertisers who choose to avoid the content network, not with Google (especially since Google has taken any number of steps to encourage advertisers to use the content network). |
The best way Google could encourage advertisers to include the content network is to get rid of the MFA's. If there was a standard for quality in what is acceptable for AdSense I think some would come back.
[edited by: annej at 8:56 pm (utc) on Mar. 8, 2007]
|In other words, and I've been saying this all along, Google has prostituted our sites as search results to their enormous benefit. While we provide the basis for searches, we receive none of the monetary benefit. |
Are you seriously suggesting that publishers don't receive "monetary benefit" from Google Search traffic? If you're correct, why is Webmaster World's Google Search News forum awash in screams, wails, and the sound of gnashing teeth every time there's a noticeable change in Google's search rankings?
The relationship between Google and Web publishers is symbiotic: Both sides benefit, in much the same way that both sides benefit when magazine articles are listed in The Magazine Index or the Reader's Guide to Periodical Literature.
Sure, Google AdWords clicks probably fetch higher revenues, on average, than AdSense clicks. But that isn't because anyone's exploiting or cheating you--it's because there's more demand (and therefore higher bids) for Google Search clicks than for AdSense clicks.
Sorry EFV, but that's my opinion and I'm sticking to it.
Things have gone a long way since I joined AdSense and would I do it again? Yep, you bet!
In a word: YES.
Symbiotic relationships were ruled irrelevant in 1968 at the height of the hippie movement. Intellectuals now overwhelmingly prefer osmosis.
|we all took big ecpm hits late last year... |
No, no, and once again - no!
It is simply not true that "we all took big ecpm hits late last year".
First of all, who is "we all"? We all at WW? A group of publishers you know personally? The posters to this thread? - I am not affected by this. Mind you, I am not happy with my revenues, but I am NOT affected by a significant drop in eCPM (not even hit by EPC drops).
Second, what are "big ecpm hits"? Based on what? One week revenues? Monthly revenues? Quarterly revenues? And is it 10%, 20%, 50%, 90%? What is "big"? - Again, looking at my stats, I see that the "swings" (or variance coefficient) of eCPM have become smaller over time. Beginning in September '06, my eCPM has become quite predictable. And from looking at the moving 31-day-averages (again, since 09/06), I see that eCPM is swinging between 94% and 108% of the overall average. Which is actually quite good. Again, I do not see "a big ecpm hit". Not for my sites.
Third, why restrict the complaint to "late last year"? Is there a slight chance that you are in a seasonal business? - I am in a seasonal business, and in a way it is scary. You start off with a good year, and then traffic vanishes (at least enough to feel in your pockets), and you start to re-think your strategy, think whether you've done everything OK? And then, around New Years Eve, the channels suddenly open up again, traffic and clicks are back, and you are happy again and open bottles of champagne.
Sorry for the rant.
Personally, I think we should try to avoid general accusations. We have to look at each piece of data (as much as Google provides to us) and try to judge it neutrally and cool. Only if we can find EVIDENCE in the data set that something is really really wrong, we should probe whether others are experiencing a similar problem.
Just my $0.02
We All = Many
Large Drop = >50%
Over time = year over year
No mention of seasonal = not seasonal
Count me into the we all, large drop, over time.
Count me in on the big drop as well. I've taken a 50% EPC drop, year-over-year as of February.
When making comparisons of "this month last year" to "this month this year," you need to eliminate all other variables to get a meaningful result. That's hard to do unless:
- Your content is exactly the same as it was last year.
- Your traffic sources are exactly the same as they were last year.
- Your ad placement, page layout, etc. are exactly the same as they were last year.
Even if you can make a meaningful comparison, you won't know the causes of a decline.
On my own travel site, for example, I've seen a noticeable decline in hotel-booking ads from no-name advertisers. That's fine with me, because such ads compete with my own affiliate links, but it does mean there's been an apparent decrease in AdSense demand on sections of the site where I used to see a lot of unwanted hotel-booking ads. Why has there been a decline in demand by hotel-booking sites? I'd guess that affiliate marketers are finding it tougher to make a living from PPC traffic than they did a year ago, or maybe a lot of those affiliate marketers have shifted their attention to click arbitrage. I just don't know, but it is obvious that the ad mix is different from what it was last year or the year before. (Mind you, I'm not complaining: "Pure affiliate play" advertisers are no more desirable than click arbitrageurs as far as I'm concerned, and I'm happy to see fewer of their ads on my site.)
Also, bear in mind, we (here on WebmasterWorld) are a very small percentage of the entire program, and the hardest hit are the most likely to be vocal about it. That has to skew any statistics.
Traffic collapse is 100% linked to CTR collapse on my site. The faster your site it seems the less people click the ads. Around 1% less, or big Google traffic sends you more commercial/stupid? users.
A slow server seems to be the winner.
|The faster your site it seems the less people click the ads....A slow server seems to be the winner. |
That may be true if a site's pages have no useful content and the site exists only to "flip" traffic (in which case the site is likely to be hit by smart pricing and/or to be blocked by savvy advertisers' domain filters).
|That may be true if a site's pages have no useful content and the site exists only to "flip" traffic (in which case the site is likely to be hit by smart pricing and/or to be blocked by savvy advertisers' domain filters). |
At least I gave an example.
Since my site exists since 9 years Google wants the traffic to be there, wouldn't that be the conclusion in the Google Rosy Cloud world. Google did it it must be good. :)
[edited by: martinibuster at 9:01 pm (utc) on Mar. 9, 2007]
[edit reason] TOS 4 & 19. [/edit]
Ya.. I guess EFV is right.
Why bother discussing changes in EPC,CPM etc.
In fact why don't we just close this forum since nothing new has been said in 6 months anyway.
Whenever something is said you get folks saying you can't say that or you know nothing about statistics (where is that guy).
Perhaps we should wait for a statistically significant amount of time.. how about we meet back here in 17 years and discuss the 1st 10 years vs the last 10 years. Would that be better EFV? (don't forget to leave your sites unchanged).
EFV noted that:
|When making comparisons of "this month last year" to "this month this year," you need to eliminate all other variables to get a meaningful result. That's hard to do unless: |
- Your content is exactly the same as it was last year.
- Your traffic sources are exactly the same as they were last year.
- Your ad placement, page layout, etc. are exactly the same as they were last year.
Funny, EFV, but you left out of the list the fact that a year is so long in Internet time that holding those three items constant is not nearly enough.
One would have to hold the advertisers and users knowledge and practices constant as well, among other things. But those standards may be a little strict for what we're doing here. ;)
No, we can't ever know for sure, even with your rules applied, but we can still struggle to try.
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