Forum Moderators: martinibuster
...social networking inventory is not monetizing as well as we would like,” said George Reyes, Google’s chief financial officer... In 2006, Google agreed to a three-year deal to sell ads on MySpace, committing to pay a minimum of $900 million.People involved in that deal said that Google never assumed that it would earn its $900 million back from that deal, but it appears to be losing even more than it had expected.
Three things come to mind:
1. Social networks like MySpace are among the most visited sites on the Internet. That's a lot of page views.
2. Ad inventory at MySpace isn't working out. That's a fact according to a quote of Sergey Brin within the article where he acknowledges a failure to monetize.
3. Has the flood of inventory at MySpace and other social networks negatively affected the supply and demand ratio of average-joe publishers, resulting in lower earnings?
enough to justify their $15 billion valuation or they are profitable so they must be doing great?
To conclude, small and medium Adsense publishers are now paying for the failed Myspace deal (in one way or the other).
It would be more accurate to say that Google's shareholders are paying: first, in a lower stock price; and second, in a higher overall payout to AdSense partners.
#1 - Join our friend network, it's better than myspace.
#2 - Join our friend network, it's REALLY better than myspace.
#3 - Make more new friends than on myspace fast with "such and such".
#4 - Join our network, it's REALLY REALLY better than myspace.
And thats just on your typical 4 ad text only 728x90.
I think this myspace experiment SCREAMS for a reason to make contextual an option. Google could have converted BIGTIME had the ads related to members interests instead of keying in on the word myspace.
OR - Google could have allowed Britney Spears ads on their network, she's made more people rich this year than anyone :)
The increase in overall TAC rate was primarily related to the performance of a few AdSense partner sites, for which we are required to make guaranteed payments. We have found that social networking inventory is not monetizing as well as expected. AdSense TAC was $1.3 billion, while TAC related to distribution partners and others who direct traffic to our websites totaled $125 million in the quarter.
I remember there were posts in the past doubting the theory that there are deals with fixed payouts.
And now Google admits that the increase in TAC is mostly caused by these guaranteed deals. In other words: there is no increase for the remaining publishers. But we can safely assume that the number of publishers has increased. Thus, the payout per publisher has to decrease. All thanks to those sweetheart deals.
Thus, the payout per publisher has to decrease
Perhaps I'm being dense, but how is this a viable conclusion? Why couldn't the payout be unchanged (no decrease) AND still compensate the guaranteed deals?
Period 1
1,010 publishers in total:
1,000 Normal Adsense Publishers = $1,000
10 Sweetheart Deals = $100
Total TAC = $1,100
Average TAC per publisher = $1,100/1,010 = $1.09
Average TAC per "normal" publisher = $1,000/1,000 = $1.00
Average TAC per Sweetheat Deal = $100/10 = $10.00
Period 2
1,215 publishers in total:
1,200 Normal Adsense Publishers = $1,050
15 Sweetheart Deals = $150
Total TAC = $1,200
Total TAC increase = $100 (hoorah! - "The absolute amount Google paid to their partners increased!)
Average TAC per publisher = $1,200/1,215 = $0.99 (-$0.10)
Average TAC per "normal" publisher = $1,050/1,200 = $0.88 (-$0.12)
Average TAC per Sweetheat Deal = $150/15 = $10.00 (unchanged)
(All figures made up just to show the point.)
1. Both the sweetheart deals and the normal publishers contributed to the increased in overall TAC. (OK, in the example above this is the case.)
2. The overall increase in TAC was "primarily related to the performance of a few Adsense partner sites [with] guaranteed payments." (OK, in the example above this is the case. Though the increase seems to be split 50/50 between normal sites and sweetheart deals. Probably the reality looks much darker.)
3. The fixed payments are fixed, i.e. regardless of traffic or actual performance, the partners get a pre-determined amount. (OK, the sweetheart deals get each a fixed amount.)
4. The only assumption to make this work is the increase in "normal" publishers, but we can safely assume that more publishers were joining the program during the period.
I think, that Google knows exactly why they never released any publisher figures or any details on the structure of their publisher base: if they did, the situation would be all clear to the normal publishers, and they'd probably look for alternatives.
The Myspace deal, BTW, was announced August 2006, and ad-serving began in October 2006. Guess what? Looking at my 200day moving average eCPM chart sees a constant decrease, beginning October 2006! Just coincidence?
(Ah, it will be great to move to Mahoo!, once they will offer a real competitor to Google.)
Looking at my 200day moving average eCPM chart sees a constant decrease, beginning October 2006!
Amazing. I wonder how you got picked to subsidize MySpace? :-)
Amazing. I wonder how you got picked to subsidize MySpace? :-)
A smiley, at least. :-)
But still, the point I am trying to make is that the MySpace deal (and all those other sweetheart deals) might have affected normal publishers beyond expectation.
The fairy-tale of "TAC has increased, so Adsense publishers are doing well" has now been demasked as this - a fairy-tale.
Amazing. I wonder how you got picked to subsidize MySpace? :-)By sharing the same pot of money - it is a cliché
I wonder if MySpace is being smart priced...
I don't think so. Actually, MySpace gets "stupid" pricing instead since Google is probably unable to recoup a minimum of $300 millions a year from ads on MySpace traffics.
But still, the point I am trying to make is that the MySpace deal (and all those other sweetheart deals) might have affected normal publishers beyond expectation.
It may have had an effect on publishers who compete with MySpace for impressions and ads. AdSense's strength has always been in the niches (that's the nature of the beast), and that may be one reason why some publishers are hurting while others are seeing a positive trend.
To put it another way, if you rely on ads for ringtones, MySpace may be a threat; if you have a site geared to travelers, industrial purchasing agents, or office managers, it probably isn't.
As huge and powerful as Google is, they have a soft and vulnerable underbelly. If old-style Bill Gates and his hard edge were still there instead of Ballmer, this Google would now be where Netscape is.
Google took over the internet because their belly is still hungry and MS is not. It isn't because they are the biggest geniuses on the planet.
Funny how "good" Google used to look and now they make MS look like nice guys...
As huge and powerful as Google is, they have a soft and vulnerable underbelly.
Are you talking about MySpace? I assume so, since that's the topic of this thread.
Let's do the math: Google guarantees News Corp. $300 million a year for MySpace ads. That's $75 million per quarter. Let's guess, just for the sake of argument, that actual MySpace revenues are a mere $25 million per quarter, so that Google's quarterly overpayment is $50 million. Last quarter, Google's "partner sites generated revenues, through AdSense programs" totaled $1.67 billion, meaning that our conjectural $50 million overpayment to MySpace represented less than 3% of partner revenues. What's more, Google increased the overall partner payout to 80% last quarter, so any net effect on other publishers would have been minimal.
Bottom line: Publishers who have experienced big declines in revenues over the past few months (or even the past year) need to spend some time with their calculators before assuming that Google's guaranteed payments to MySpace are the reason for their troubles. It would be more productive to look for problems closer to home, and not to rely on a single revenue stream.
Bottom line: Publishers who have experienced big declines in revenues over the past few months (or even the past year) need to spend some time with their calculators before assuming that Google's guaranteed payments to MySpace are the reason for their troubles.
Or better yet, spend time with their calculators identifying better options for their ad space. If your earnings have dropped(as mine have to a huge degree), it really doesn't matter why. I have much better things to do with my time than try and prove that my earnings reduction was caused by the Google/MySpace deal. Even if I somehow could prove it, then what? Time is better spent solving a problem than identifying it's cause.
Let's do the math:
Indeed, let's do the math.
Google guarantees News Corp. $300 million a year for MySpace ads. That's $75 million per quarter. Let's guess, just for the sake of argument, that actual MySpace revenues are a mere $25 million per quarter, so that Google's quarterly overpayment is $50 million.
Are you trying to say that News Corp. is getting a 300% revenue share? $25 million revenue, $75 million payout? Cool. I thought the best deals would be 100%.
Last quarter, Google's "partner sites generated revenues, through AdSense programs" totaled $1.67 billion, meaning that our conjectural $50 million overpayment to MySpace represented less than 3% of partner revenues. What's more, Google increased the overall partner payout to 80% last quarter, so any net effect on other publishers would have been minimal.
Uh. No.
You have to put the total payment ($75mm) into relationship with the total payouts ($1,336mm). To me that looks more like 5.6% -- take ten of these deals (e.g. Youtube), and you see how a few publishers get 56% of the payouts.
Bottom line: Publishers who have experienced big declines in revenues over the past few months (or even the past year) need to spend some time with their calculators...
You see, it is not enough to get the calculator out. You must also be able to use it. ;-)
...before assuming that Google's guaranteed payments to MySpace are the reason for their troubles.
Google THEMSELVES made the statement. According to Seeking Alpha [seekingalpha.com] no one less than George Reyes said: "The increase in overall TAC rate was primarily related to the performance of a few AdSense partner sites, for which we are required to make guaranteed payments. We have found that social networking inventory is not monetizing as well as expected."
I interpret that as: "Google's guaranteed payments to MySpace are the reason for their troubles."
take ten of these deals (e.g. Youtube), and you see how a few publishers get 56% of the payouts.
I interpret that as: "Google's guaranteed payments to MySpace are the reason for their troubles."
But they're unlikely to be the reason for your troubles, as you keep suggesting.
BTW, I agree with WebPixie: If AdSense doesn't work for you, why not look for a revenue source that does? Be cutthroat: When partners don't perform or aren't a good match for your site, dump 'em. And if you can't find a better-paying alternative, ask yourself why.
Bottom line: Publishers who have experienced big declines in revenues over the past few months (or even the past year) need to spend some time with their calculators before assuming that Google's guaranteed payments to MySpace are the reason for their troubles.Or better yet, spend time with their calculators identifying better options for their ad space. If your earnings have dropped(as mine have to a huge degree), it really doesn't matter why. I have much better things to do with my time than try and prove that my earnings reduction was caused by the Google/MySpace deal. Even if I somehow could prove it, then what? Time is better spent solving a problem than identifying it's cause.
I keep getting drawn back to these discussions hoping something is revealed that I can utilize to return my AdSense revenue to the previous glory. Time has shown that my diversification efforts where on target all along. Personnaly, I wish all of our challenges could be attributed to smart pricing as my perception is that I (we) could fix that.
It clear that none of us have any conclusive or absolute control over our AdSense revenue.
[edited by: Edge at 6:46 pm (utc) on Feb. 2, 2008]
It clear that none of us have any conclusive or absolute control over our AdSense revenue.
Yep. That's the nature of the beast. If you want anything like "conclusive or absolute control," you've got to sell advertising directly--and even then, you're at the mercy of the market.
mercy of the market
Yes.
I'm managing an Adwords campaign right now that's dealing in some fairly large numbers.
For one placement that had over a million impressions yesterday, the exact same ad that cost us 21¢ CPC yesterday is costing 33¢ average CPC today and we're getting fewer impressions.
The owners of that site might wonder what they did right or wrong from one day to the next, but the primary difference in this case is more aggressive bid competition today than yesterday.
My advice: Don't sweat about mysterious Adsense fluctuations. Invest your energy in creating a quality site whose traffic will be attractive for advertisers.
That IS something you can control and it's what will be most productive in the long run.
[ft.com...]
Ha! No kidding! Ugliest site on the internet. With pages "designed" and organized by clueless teenie boppers with zero web design skill. And don't even talk about landing page optimization.
Google didn't know that before the MySpace deal. Interesting.
So, Mr. Google, tell us about your pre-investment testing before getting MySpace.
What does Google plan from here on out?
"Sorry, your page must be improved and look professional by the end of this month. Right now it looks like hell. If it continues to be ugly and doesn't perform, we will no longer feel you are a good fit for our network and delete it. Govern yourself accordingly."
p/g
I knew something fishy was going on the moment it started so I began to offer Google less impressions a long time ago...now I barely use adsense at all.
Didn't need to calculate anything other than the bottom line stopped cutting it.
It's nice now to know some of the reasons. Those in denial or with an agenda can make any excuses they want, but the truth is obvious.
Adsense is great for spammy sites that can build millions of pages automatically. Their adsense pennies add up. But serious sites? They can monetize better in other ways. If you're making a pretty penny w/ a serious site and adsense on it, you can make an even prettier penny using other means...
Adwords using only google search and opting out or specifying targetted sites might be worth it. But unless you invest a lot of time to gain knowledge of the system, you're dead meat on the content network. Quality is down down down.
Adsense is great for spammy sites that can build millions of pages automatically. Their adsense pennies add up. But serious sites? They can monetize better in other ways. If you're making a pretty penny w/ a serious site and adsense on it, you can make an even prettier penny using other means...
Why do people always assume that it's "either/or"? If you have a stong niche site and you're smart, you'll follow the example of major media sites and use AdSense with other revenue streams (such as display ads and affiliate links).
Adwords using only google search and opting out or specifying targetted sites might be worth it. But unless you invest a lot of time to gain knowledge of the system, you're dead meat on the content network.
Really? I use a "set and forget" approach myself: I paste the AdSense code on my pages and let Google do the drudgery. That approach has worked well for me. Maybe that's the secret of not becoming "dead meat": Don't assume that you know more about micromanaging AdSense than Google does.
Refresh my memory -- what are the ten deals you're referring to? Or was that just a rhetorical means of vastly inflating the impact?
I don't know about 10 deals but I'd also say that claiming 10 deals isn't vastly inflating impact. Hi5 and Friendster aren't big in the US, but they have huge international traffic. Add in YouTube, MySpace, Fotolog, MetroFlog, Gmail, Orkut?, Blogger?, just off the top of my head. Who knows what kind of deals Google has with other big sites and what internal agreements AdSense has with numerous other Google products. We don't know if the MySpace deal is isolated or the tip of the iceberg.
WebPixie: Time is better spent solving a problem than identifying it's cause.
read that again :-) au contraire
It's simple logic: Increase the supply, by consequence demand decreases. In this case it means costs per click will decrease because of too much inventory.
I am not saying this is the answer for everyone who ever came here to complain about lower CPC. I am saying that this is a genuine situation where inventory was flooded and the consequence is a decrease in competition, triggering lower prices.
Yes, yes, there are those who will complain because their crap niche earning is going down. Part of that problem is their niche, and they will never recover because there's too much inventory coming online- regardless of deals like MySpace. And just as in the real world there are homeless people, there are internet homeless who will forever spend their lives hobbling along failing and flailing because that's human nature. Not everyone gets it. All we can do is point them to the library or give them good advice. Whether they take it or not is their business.
