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This 131 message thread spans 5 pages: < < 131 ( 1 2 3 [4] 5 > >     
Anatomy of an EPC Collapse
Building a List of Causes
martinibuster




msg:3271231
 6:14 am on Mar 5, 2007 (gmt 0)

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?

 

Jolly_Roger




msg:3277115
 11:00 pm on Mar 9, 2007 (gmt 0)

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.

europeforvisitors




msg:3277144
 12:08 am on Mar 10, 2007 (gmt 0)

Ya.. I guess EFV is right. Why bother discussing changes in EPC,CPM etc.

Discuss them to your heart's content, but don't expect to go unchallenged if your logic runs to:

- My EPC has been down 20% in the last two hours, so something strange is happening;, or...

- My earnings have tanked since November, so all publishers' revenues must have tanked, or...

- I'm not making as much as I did last week/month/year, so Google must be pocketing a bigger share of AdSense revenues, and anyone who points out the fallacy in my argument must be a liar or a Google cheerleader.

kaizenlog




msg:3277383
 8:34 am on Mar 10, 2007 (gmt 0)

It is normal in any industry that as more people enter the market, the value will be lower.

Scarcity makes the value increase. Look at Gold and water as an example.

darkmage




msg:3277386
 8:40 am on Mar 10, 2007 (gmt 0)

EFV, you forgot:

There must be an earnings cap.

sailorjwd




msg:3277494
 1:03 pm on Mar 10, 2007 (gmt 0)

I do love the conspiracy theories.

Like the drunk driver blaming accident on the tree that jumped into the middle of the road.

And, by the way, my EPC is up 70% this morning. I let you know in 15 mins if it is a 'trend'.

However, i must admit that the QS blackbox really drives me nuts.

europeforvisitors




msg:3277731
 6:27 pm on Mar 10, 2007 (gmt 0)

And, by the way, my EPC is up 70% this morning. I let you know in 15 mins if it is a 'trend'.

Mine was up quite a bit when I checked an hour ago, but now the AdSense site is unavailable, so I guess it's time for a thread on:

- "AdSense is down"

or...

- "Google has temporarily shut down AdSense so Larry and Sergey can shovel our cash into their money bin."

annej




msg:3277765
 7:08 pm on Mar 10, 2007 (gmt 0)

Yeh, I was wondering where the "AdSense is down" thread is. ;) Give it a few minutes and there will be one.

ken_b




msg:3277787
 7:29 pm on Mar 10, 2007 (gmt 0)

AdSense is down? Drat! There goes my retirement!

dnx134




msg:3277933
 10:27 pm on Mar 10, 2007 (gmt 0)


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...

I'm of the opinion that this is exactly what's happening.

Imagine how tempting it must be when you can increase your profits (and thus inflate your share price) by a few hundred million by tweaking a single line of code. Of course, that can't go on for ever, and it it were ever proved, AdSense (and Google as a whole) would be dead in the water.

I believe this is the real reason Google do not tell publishers or advertisers what percentage they keep for themselves. They can change it whenever their profits need a quick boost. Unfortunately, it may also be their Achilles' heel.

Google's profits and share price are pretty much arbitrary and are not a genuine reflection on how the company is performing - which in the long term is bad news for the whole industry.

europeforvisitors




msg:3278078
 2:23 am on Mar 11, 2007 (gmt 0)

Imagine how tempting it must be when you can increase your profits (and thus inflate your share price) by a few hundred million by tweaking a single line of code. Of course, that can't go on for ever, and it it were ever proved, AdSense (and Google as a whole) would be dead in the water

Key word in the above statement: "Imagine."

Why not blame your EPC troubles on Opus Dei? That way, you'd at least have the ingredients for a bestselling novel. :-)

jomaxx




msg:3278160
 4:37 am on Mar 11, 2007 (gmt 0)

dnx134, you explain quite clearly why this kind of manipulation is futile, so I fail to understand why you believe Google is doing it anyway.

mzanzig




msg:3278180
 5:27 am on Mar 11, 2007 (gmt 0)

jomaxx,

I think dnx has a point here. There are short-term and long-term expectations that have to be considered. And these are not necessarily identical, thus different strategies apply. Being able to tweak the publisher earnings with no questions asked is indeed very tempting to solve short-term goals, and I would be surprised if the system does NOT work that way. After all, that is the whole point of not sharing information. But I admit that this is not a solution to long-term problems. For these, Google needs (and develops) different strategies, e.g. introduction of site-targeted PPC campaigns.

sailorjwd




msg:3278340
 1:28 pm on Mar 11, 2007 (gmt 0)

Google ate my homework.

dnx134




msg:3278375
 2:32 pm on Mar 11, 2007 (gmt 0)

dnx134, you explain quite clearly why this kind of manipulation is futile, so I fail to understand why you believe Google is doing it anyway.

Because of what I've seen in my stats over the last few years - and also because it's just too tempting for Google NOT to "tweak" their revenue algorithms when they don't have anyone to answer to.

I may be over-reacting, and I'm deliberately taking quite a hard line stance on this in order to try to make the point. But I believe my concerns are valid, and I would rather be the one questioning how a large corporation like Google does business than bury my head in the sand.

If it turns out Google ARE manipulating publishers' earnings, then it has ramifications for the whole industry. There are many, many businesses - and livelihoods - that currently depend almost entirey on Google.

fearlessrick




msg:3278393
 2:55 pm on Mar 11, 2007 (gmt 0)

I would be surprised if Google didn't tweak the code to ensure meeting their quarterly earnings goals. It would make no sense at all if they were to miss a target since they have the ability to do so and in fact have a fiduciary reposnsibility not to advertisers and publishers, but to shareholders.

To think that somebody - anybody - at google gives a rat's behind for any individual advertiser or publisher's welfare is a ludicrous concept. At least as ludicrous as thinking they treat all customers in a fair, open and honest manner. We at least are sure that they are not open with anyone, so why shoud they be given the benefit of the doubt?

I tend to not trust people or companies who keep secrets and Google is second only to the US government when it comes to keeping secrets, and we all see where that leads.

Those who want to rationalize everything in Google's favor can continue to do so until there's no reason to bother any more. For the rest of us, I think questioning authority (especially when it has a direct effect on one's livlihood) is a worthwhile endeavor.

I can imagine EFV and others during revolutionary times defending the practices of King George and the British government, or worse, as willing subjects in Germany during the 1930s. If one wishes to accept the edicts of authority without question, one should be willing to accept the consequences. Since I am not willing to do so, I protest.

europeforvisitors




msg:3278395
 2:57 pm on Mar 11, 2007 (gmt 0)

because of what I've seen in my stats over the last few years

Why not share your evidence instead of making a statement that borders on libel?

- and also because it's just too tempting for Google NOT to "tweak" their revenue algorithms when they don't have anyone to answer to.

Critical thinking is more productive than looking in the mirror.

europeforvisitors




msg:3278422
 3:50 pm on Mar 11, 2007 (gmt 0)

I would be surprised if Google didn't tweak the code to ensure meeting their quarterly earnings goals...

OK, but why are some publishers hurting while others are doing better? We keep hearing "Google must be taking a bigger cut of the payout," but the disgruntled members who make such accusations are never able (in fact, they hardly ever try) to provide a convincing answer to that simple, obvious question.

Those who want to rationalize everything in Google's favor can continue to do so until there's no reason to bother any more. For the rest of us, I think questioning authority (especially when it has a direct effect on one's livlihood) is a worthwhile endeavor.

Nobody here is trying to "rationalize everything in Google's favor." But some of us think that accusations should be accompanied by hard evidence, not just by angry rhetoric.

I can imagine EFV and others during revolutionary times defending the practices of King George and the British government, or worse, as willing subjects in Germany during the 1930s.

Hey, if you want to use that kind of analogy, I can imagine certain fearless members making unsupported allegations about WMD and yellowcake uranimum just so they can have an excuse for a war. :-)

If one wishes to accept the edicts of authority without question, one should be willing to accept the consequences. Since I am not willing to do so, I protest.

Rick, you've been threatening to dump AdSense for how long now...a year? two? Maybe it's time to show The Man that you're serious.

Visi




msg:3278445
 4:33 pm on Mar 11, 2007 (gmt 0)

I think the angry rhetoric is great...especially if Google is monitoring the pulse of their publishers. EFV this discussion is totally hypothetical from both sides....and no evidence exists outside of google to defend positions. This should not be reason for people not to suggest reasons for an EPC drop. Believe this discussion was on that fact..possible reasons ...not whether this had actually occurred.

One of the logical reasons is that Google is manipulating payouts to cover their long term fixed revenue partners vs adsense publishers. Although their annual report suggests that overall payout percentages remain fairly constant the "how" of payout cannot be determined. A section of their report deals with this and recent negotiations "may" have left them in the position of robbing Peter to pay Paul.

So another reason possible for EPC reduction...too many corporate deals by Google.

So to me chipping away at the publishers income, especially if only occasionally...(written off as a statistical allowance!) when required to meet profits could be accomplished. The do no evil may be painted over with the new "please the shareholders" slogan.

europeforvisitors




msg:3278517
 6:11 pm on Mar 11, 2007 (gmt 0)

OK, Visi, if you want to engage in idle speculation, then why not go with something more obvious and reasonable: namely, that Google has implemented a "quality score" on the publisher side? That would help to explain why some publishers have seen their earnings plunge while others have been unaffected or only minimally affected. And it would be a far more logical explanation than the oft-made, emotion-based claim that Google has cut publisher earnings across the board. (The latter claim may make some publishers feel better, but it runs counter to something that we actually know: namely, that some publishers have seen increases in EPC, earnings, etc.)

steve40




msg:3278538
 6:36 pm on Mar 11, 2007 (gmt 0)

It could well be G has decided to take a larger percentage of the pie and even if they have there is nothing you or I can do to prove it, there are so many variables that are not just down to adsense even if the traffic is the same

SE referrals may be the same number as they were a year ago on the same page but there may be more long tale queries etc. etc.

If G has implemented a number of changes at the same time which is their normal way , as EFV said a quality score for publishers could have been implemented at the same time as an additional .001% increase in G earnings we are never going to know.

As companies grow and shareholders become a larger driving force ( increased earnings needed ) most large companies have implemented ways of increasing earnings and only when the next new breed of companies or technology comes along do you find out, The best example is to go back to the glory days of IBM where they could do no wrong and charge whatever they wanted to until the next generation of company could attack the customer base.

If G is taking a larger percentage and nobody here could even guess let alone prove it the market and competition will be who decides if publishers move elsewhere

I personally do not see any objection to this being discussed in an open forum providing posters do define that what they are doing is pure speculation and can not be proven

steve

Hobbs




msg:3278548
 6:42 pm on Mar 11, 2007 (gmt 0)

EFV,
Almost in every post you keep challenging people to answer why you were not affected.

Maybe with a little less rubbing it in, others might stop getting offended and listen to your arguments that I must admit are not totally devoid of some logic if one weeds out the opinionated bits.

fearlessrick




msg:3278554
 6:45 pm on Mar 11, 2007 (gmt 0)


OK, but why are some publishers hurting while others are doing better? We keep hearing "Google must be taking a bigger cut of the payout," but the disgruntled members who make such accusations are never able (in fact, they hardly ever try) to provide a convincing answer to that simple, obvious question.

Proof will never come from Google, but I'd suspect that some of Google's larger partners fare better. Besides, the algo is always seemingly in a state of flux, so I, for one, believe G can fiddle with any aspect of it at any time.

Nobody here is trying to "rationalize everything in Google's favor." But some of us think that accusations should be accompanied by hard evidence, not just by angry rhetoric.

Evidence from a corporation which operates in secret is pretty hard to come by. I'm sure even you would agree with that. Still, I've never heard one comment from you even suggesting that G is not the paragon of fairness, kindness and corporate largesse.

Hey, if you want to use that kind of analogy, I can imagine certain fearless members making unsupported allegations about WMD and yellowcake uranimum just so they can have an excuse for a war. :-)

Simply a bad metaphor on your part. I've been opposed to the war and the administraton for a long time and that continues to be my public position.

Rick, you've been threatening to dump AdSense for how long now...a year? two? Maybe it's time to show The Man that you're serious.

Please point out where I've threatened to remove Google code as you suggest. I've always been critical, but never to th point of cutting my own throat. As alternatives appear, I've tested them and I have removed some of their code. I've also recently begun selling my own ads and that's been promising. G has its place, but it's obviously not something one can rely upon.

Apparently some people can engage in personal assault without rebuke from the mods. When I do it, my posts are removed as quickly as I post them. Must be nice to get special treatment, but, hey, you're a special guy.

europeforvisitors




msg:3278563
 6:50 pm on Mar 11, 2007 (gmt 0)

If G is taking a larger percentage and nobody here could even guess let alone prove it the market and competition will be who decides if publishers move elsewhere

But we know from Google's quarterly reports that the percentage paid to AdSense partners is about the same from one quarter to the next. That doesn't mean all AdSense partners/publishers receive equal payout percentages; it does mean that Google isn't pocketing a bigger share of the take overall.

As for competition deciding if publishers move elsewhere, that's a good rationale for a "quality score." It would make far more sense for Google to reward the publishers it can't afford to lose (or which it wants to keep for philosophical, ideological, or PR reasons) while encouraging less profitable or desirable publishers to jump ship for MSN, Yahoo, etc. Google has taken that approach with AdWords advertisers, so why not with AdSense publishers, too?

This would be a win-win situation for Google: Its profit margins on AdSense accounts would increase, and the competitiveness of other networks would be diluted by an influx of AdSense refugees who never realized that Google was ushering them politely toward the door.

europeforvisitors




msg:3278593
 7:14 pm on Mar 11, 2007 (gmt 0)

EFV,
Almost in every post you keep challenging people to answer why you were not affected.

Hobbs, I didn't say I haven't been affected. My average EPC and eCPM were lower in February than they were a year earlier. That doesn't mean Google is cheating me, however, just as a drop in the value of my equity mutual-fund shares doesn't mean the fund managers are stealing from my retirement account.

I personally think that many AdSense publishers have been hurt by dilution as "content network" inventory has grown exponentially. The introduction of separate bidding for search and content ads in 2006 has almost certainly been a factor, too. In my sector, growth in display advertising may also be hurting AdSense revenues: I used to see AdSense ads for airlines and hotel chains; today, many of those same advertisers are buying display ads through specialty ad networks and rep firms.

BTW, I think dilution may be as big a concern for "content network" advertisers as for publishers. A couple of years ago, an advertiser for, say, Elbonian luxury raft cruises could buy AdSense ads and be fairly certain that the ads would run mostly on editorial or travel-agency pages that reached readers who were researching purchases. That's no longer the case, thanks to the exponential growth in MFAs, "Web 2.0" sites with keyword-driven, computer-generated pages on every conceivable topic, etc. If I were a hotel owner in Rome or a cruise travel agent in Poughkeepsie, I'd probably be leery of CPC ads on the "content network" myself, if only I'd be afraid that my money was disappearing into a black hole. (With luck, the introduction of site-targeted contextual ads in a few months will bring in or bring back cautious or skeptical advertisers.)

steve40




msg:3278613
 7:23 pm on Mar 11, 2007 (gmt 0)

EFV

You do not KNOW that Google is not taking a larger percentage unless you can point me to a Google Document that states they have not increased the percentage they take

ABOUT the same figures from the quarterly report does not mean No Changes have taken place with the percentage they take

If you are going to quote me please be sure to quote the complete text where I said if they had implemented an additional .001% together with implementing a Quality Publisher Score we would not know ,
This is of course unless you know much more about Google Financials and inner working practises than just from quarterly figures

steve

europeforvisitors




msg:3278649
 8:11 pm on Mar 11, 2007 (gmt 0)

You do not KNOW that Google is not taking a larger percentage unless you can point me to a Google Document that states they have not increased the percentage they take

Sure, and you don't KNOW that YPN isn't controlled by the Mafia, or that the Pope isn't gay. But would you (or any other reasonable person) go around suggesting, without providing supporting evidence, that YPN is controlled by the Mafia or that the Pope is gay?

sailorjwd




msg:3278662
 8:34 pm on Mar 11, 2007 (gmt 0)

Perhaps this discussion has been run to exhaustion AGAIN.

It might be nice to talk about something a little more fun. Maybe what online advertising will look like 18 months & 36 months down the road. How about anyone experimenting with youtube to get visitors to your site? Or, cellphones & adsense?

I'm concerned about the 'special guy's' blood pressure.

europeforvisitors




msg:3278664
 8:41 pm on Mar 11, 2007 (gmt 0)

It might be nice to talk about something a little more fun. Maybe what online advertising will look like 18 months & 36 months down the road. How about anyone experimenting with youtube to get visitors to your site? Or, cellphones & adsense?

Why not start a thread, either here (if it's about AdSense) or in the Advertising Sales and Affiliate Programs [webmasterworld.com] forum?

justageek




msg:3278685
 9:19 pm on Mar 11, 2007 (gmt 0)

OK, Visi, if you want to engage in idle speculation

EFV - I'm curious to know why you think what visi wrote (quoted below) is idle speculation?

One of the logical reasons is that Google is manipulating payouts to cover their long term fixed revenue partners vs adsense publishers

That is from Google themselves. Google has LOST money on at least one very big fixed payout deal. To keep the numbers even the money has to come from somewhere and it can't be from AdWords or the Google appliance or anything else unless the balance sheet reflects it which it does not. So where could the money come from? Selling girl scout cookies on the side and not reporting it perhaps?

JAG

europeforvisitors




msg:3278730
 10:03 pm on Mar 11, 2007 (gmt 0)

Justageek, I was responding to Visi's statement that "this discussion is totally hypothetical from both sides." If you disagree with Visi's statement, why not take it up with Visi?

As for whether Google has lost money on a recent fixed-payout deal, what's new about that? Google has had fixed-payout or upfront-guarantee deals all along. (Remember the big About.com deal back in 2003?) What's more, I don't think anyone in this forum has ever suggested that all publishers are treated equally, and most of us wouldn't be naive enough to suggest that they should be. The question isn't whether Google makes a profit on some publishers and loses money on others, but whether Google has cut publisher earnings across the board as some members have suggested. If that's the case, then one has to wonder why some publishers are hurting badly, others are doing okay, and others are doing great.

Let's assume, just for the sake of discussion, that Google is robbing Peter to pay Paul. Why isn't Google also robbing Matthew, Bob, or Barbi? Why, for that matter, is Google rewarding Matthew, Bob, or Barbi while reducing its payout to Peter? If Peter honestly believes that he's being targeted for punishment or pickpocketing, maybe he should search for a "list of causes" (to use Martinibuster's phrase) and come up with a fix.

ftwb05




msg:3278738
 10:15 pm on Mar 11, 2007 (gmt 0)

I think it is entirely plausible that Google, like any other business, will seek to maximise it's profits going into the year end.

I have worked for a few different retail companies over the last few years, and every single one that was a plc quietly adjusted prices on bread & butter lines in the last quarter (or pulled established offers) to beef up the bottom line.

Seek new cheese.

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