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Google's Share
Is this a clue?
cabbagehead

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 3390194 posted 4:53 am on Jul 10, 2007 (gmt 0)

One of my adSense channels today reported I made $.01. Isn't Google's minimum ad big $.03? So does this mean that best case scenario Google is still taking 65% of the gross profits and possibly/probably more?

 

europeforvisitors



 
Msg#: 3390194 posted 5:28 am on Jul 10, 2007 (gmt 0)

It isn't that simple. Google's minimum bid (whatever it may be these days) is the nominal bid before any "smart pricing" discounts.

cabbagehead

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 3390194 posted 6:38 am on Jul 10, 2007 (gmt 0)

Not sure I understand?

jomaxx

WebmasterWorld Senior Member jomaxx us a WebmasterWorld Top Contributor of All Time 10+ Year Member



 
Msg#: 3390194 posted 7:48 am on Jul 10, 2007 (gmt 0)

Smart Pricing, I'm certain you've heard of it? Maybe your site is smart-priced and the advertiser gets a discount on the bid price, or maybe the clicker was in China or something and Google makes an adjustment for that, or maybe the click & earnings were due to a CPM campaign. Heck, maybe it was the smallest click dump ever, LOL.

Add in rounding error, and the point is that this one data point doesn't really tell us anything, in and of itself.

[edited by: jomaxx at 7:51 am (utc) on July 10, 2007]

kkobashi



 
Msg#: 3390194 posted 7:50 am on Jul 10, 2007 (gmt 0)

From a macro view, one can look at the latest March 2007 10Q for a general idea on what kind of percentages publishers get and what Google takes off the top:

Revenues $3,663,971,000

Cost of Revenues $1,470,426,000 40% of revs
R&D $408,384,000 11% of revs
S&M $302,522,000 8% of revs
G&A $261,400,000 7% of revs
------------------------------------
Total Cost & Expenses $2,442,762,000
Net Income From Ops $1,221,209,000
%Net Income of Revs 33%

Google, in other words, is making 33% throughout all of its aggregate business units before taxes. Net income after taxes is 27.4%.

As mentioned above, their costs of revenues is 40%. Cost of revenues is defined as:

"Cost of revenues consists primarily of traffic acquisition costs. Traffic acquisition costs consist of amounts ultimately paid to our Google Network members under AdSense arrangements and to certain other partners (our “distribution partners”) who distribute our toolbar and other products (collectively referred to as “access points”) or otherwise direct search queries to our web site (collectively referred to as “distribution arrangements”). These amounts are primarily based on the revenue share arrangements with our Google Network members and distribution partners. Certain distribution arrangements require us to pay our partners based on a fee per access point delivered and not exclusively—or at all—based on revenue share. We recognize fees under these arrangements over the estimated useful lives of the access points (two years) to the extent we can reasonably estimate those lives or based on any contractual revenue share, if greater. Otherwise, the fees are charged to expense as incurred.

In addition, certain AdSense agreements obligate us to make 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. We amortize guaranteed minimum revenue share prepayments (or accrete an amount payable to a Google Network member if the payment is due in arrears) based on the number of search queries or advertisements displayed on the Google Network member’s web site or the actual revenue share amounts, whichever is greater. In addition, concurrent with the commencement of a small number of AdSense and other agreements, we have purchased certain items from, or provided other consideration to, our Google Network members and partners. We have determined that certain of these amounts are prepaid traffic acquisition costs and are amortized on a straight-line basis over the terms of the related agreements.

Cost of revenues also includes the expenses associated with the operation of our data centers, including depreciation, labor, energy and bandwidth costs, credit card and other transaction fees related to processing customer transactions as well as content acquisition costs. We have entered into arrangements with certain rights holders under which we distribute or license their video and other content. In a few of these arrangements we display ads on the pages of our web sites from which the content is viewed and share most of the fees these ads generate with the rights holders. "

Thus, one could say that Google pays 40% to you and keeps the other 60% in the big picture. After taxes are taken out plus R&D/S&M/G&A expenses, their real take is 27%.

In the case of the $0.01 click, the $0.01 click was likely a $0.03 ad (40% of $0.03 = $0.012).

Hope this helps.

Mantees

5+ Year Member



 
Msg#: 3390194 posted 2:02 pm on Jul 11, 2007 (gmt 0)

What do you think of this? [img149.imageshack.us]

1 click and 0$ revenue. This is a report for yesterday on a small site of mine.

I can understand adjustments, but not to the point of free clicks.
Please note that I do not display public services ads but I fill any blank ads space with my site background color.

europeforvisitors



 
Msg#: 3390194 posted 2:23 pm on Jul 11, 2007 (gmt 0)

I can understand adjustments, but not to the point of free clicks.

Maybe the click was disallowed as an invalid click? That's just a wild guess, but it makes more sense than the idea that Google is pocketing 100% of the money or giving clicks away.

timwestla

5+ Year Member



 
Msg#: 3390194 posted 8:34 pm on Jul 11, 2007 (gmt 0)

One of my adSense channels today reported I made $.01. Isn't Google's minimum ad big $.03? So does this mean that best case scenario Google is still taking 65% of the gross profits and possibly/probably more?

I think 65% is reasonable, considering that they are lining up the advertisers, plus taking care of payment collection, rotating the ads, and offering valuable site evaluation tools.

First, I couldn't get as many advertisers as Google can. On top of that, Google can charge them more than I could, because Google has more clout. So that 65% isn't really a fair evaluation. Let's say Google can get 3 cents a click but I can only get 2 cents. That means Google is taking 50% of what I could have got on my own, not 65%.

Next, I suppose I could do my own accounting and invoicing, but that takes time and it is SUPER boring. I could install a banner ad rotater and track the impressions and clicks, but that takes time.

So all-in-all, I think it's a good deal.

europeforvisitors



 
Msg#: 3390194 posted 8:51 pm on Jul 11, 2007 (gmt 0)

I think 65% is reasonable, considering that they are lining up the advertisers, plus taking care of payment collection, rotating the ads, and offering valuable site evaluation tools.

On average, they're taking far less than that, with publishers receiving the bigger share. (See the many past discussions of this topic and Google's quarterly earnings statements.)

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