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Our main problem is what Google's definition of "text ad" is as the TOS means you cannot have other text ads on a particular page, and we have been running our own text ad system (CPM) for a few years with reasonable return and gradually providing better revenue each month.
I asked for clarification on this, and it seems their def. of "text ad" is fairly strict so that even if its not a competing network and just an amateur or DIY set up for your own site it is seen as text ads. Also amazon text links are not seen as text ads as they are "affiliates" and affiliate links are exempt from being seen as text ads.
This means that we can only use adsense on a few sections, which is a disappointment, but it is still a good way to make some revenue on a few pages that so far have not been relevant enough to our text ad advertisers to have our own text ads on them.
If anybody finds any more info on how "text ad" is defined i would be happy to hear. Say for example if you dont actually sell the ads, or just have barter ads. We have another system where we run rotating text strings, which sometimes contain site announcements or breaking news but sometimes have links to commercial and related sites, and we are worried these may be counted as "text ads" too. In the meantime we can only use Adsense only on about 5-10% of our content pages.
I guess the rationale is they dont want your text ads "looking like" adsense ads therefore "stealing a benefit" from the google branding, or they dont want other text ad systems competing on the same page with their "ads by google" link. Or maybe that people may get confused that buying a text ad on your system may also get them into Adwords! Anyway if we knew the rationale it would be easier to redesign existing systems so they don't conflict.
At present Google Adsense is outperforming our own text ads by a small but significant margin, but if our upward trend continues for our own ads and adsense remains the same of go down our own ad system will be better than adwords some time this year in terms of ROI. Also because we are a niche site, sometimes there is only 1 relevant google ad on the skyscraper, meaning less choices for our readers.
Booting our own system will invlove major admin work and waiting for some contracts to expire as well as some possible bad PR with existing advertisers. We are not also not sure if Adsense returns are sustainable at their present rate, so the prospect of doing many hours of work replacing our own ads with adsence, and then having to change them all back again if adsense slowly provides less returns is not one i look forward to!
As we see it now, our best option is to replace our existing text ads with graphic ads, (much less work overall than having t replace our existing system altogether) which are ok to have on the same page.
I guess what i might do is to change the look of our text ads (which predates Adwords by the way! - did Google mimic us? ;)) and then ask google to have a look at it and "approve" it.