signor_john - 2:31 pm on May 2, 2009 (gmt 0)

The economy obviously isn't helping matters, but it's also important to remember that a number of major changes have occurred over the years. These changes have been good for advertisers and for the long-term growth and health of the network, but they've introduced a note of reality into publisher earnings. Consider:

1) When AdSense launched, advertisers were forced to buy clicks from the content network by default. What's more, all clicks were sold at full retail--there was no "smart pricing" to adjust the nominal CPC based on anticipated conversion for the advertiser.

2) Over time, Google introduced smart pricing, separate bidding for the search and content networks, placement (site) targeting, domain filters, and other tools that let advertisers spend their money more selectively than they did in the early days. Google also tightened up its definition of a "valid click," which undoubtedly had at least some effect on CTR in many cases. The net effect of these changes was to bring the cost of AdSense ads more into line with its actual value to advertisers.

3) The number of publishers using AdSense ads has probably grown hugely over the years, and in this era of automated keyword- and SEO-driven sites that spit out pages faster than a machine gun, it's a safe bet that the number of Web pages with AdSense ads has grown faster than advertisers' expenditures have grown, thereby cutting the revenue pie into smaller and smaller slices (on average, if not for every individual publisher).

4) Another factor may be the growth of Web display advertising, vertical ad networks, and media-buying tools. On my own site, display advertising has become much more important than AdSense is, and nearly all of the ads that I see on my site from big corporate advertisers are display ads from my vertical ad network, not AdSense ads. If you doubt the impact of vertical ad networks, read this ClickZ article [clickz.com] from April 30 (taking note of the fact that, in the last year, the U.S. audience for vertical ad networks has grown from 40.3 million to 109.8 million unique visitors).

Side note: Over the past 12 to 18 months, I've seen earnings per click return to the levels of 2003 and early 2004. CTR, on the other hand, has declined, bringing down eCPM. I attribute this to a combination of factors, including ad location (AdSense no longer gets "pride of place" on my pages), Google's stricter definition of a "valid click," and--over the past year or so--a worldwide recession that has discouraged casual clicking.

[edited by: signor_john at 3:04 pm (utc) on May 2, 2009]