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?
This is a clear case where it has been documented that millions of impressions, inventory, were wasted on sites like MySpace.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.
With CPC advertising, "inventory" is clicks, not impressions. Google may well have wasted millions of impressions on sites like MySpace, but the problem seems to be that users weren't clicking (i.e., generating revenue). If enough MySpace users had been clicking and generating revenue, Google wouldn't be saying that it overpaid when it made an upfront guarantee.
Mom-and-pop publishers who compete head-on with MySpace for certain types of keywords and clicks should be thanking their lucky stars that the MySpace deal hasn't been a success.
au contraire
I disagree. I think a fundamental mistake that many make in business is spending too much time trying to discover the reason for a problem instead of searching for solutions. My problem is dramatically lower earnings. Should I try and get my earnings to increase or spend hours trying to figure out if the AdSense/MySpace deal is to blame for decreased Google payouts? In the end it makes no difference at all to my bottom line why AdSense is paying so much less. It only matters that revenue is down and I prefer to use my time trying to get it to go back up.
Locking potential competitors out of the advertising market would ALSO be a valid reason.
sure, but some companies might not afford to pay $900 mil just to lock someone out. MSFT might might given Vista and Office sales though..
well, investors seem to disagree. Growth matters EFV, and this hurt their growth rate. Plain and simple. Google is rich and grew substantially but their margins got hit so they "can't afford it".
Disagreeing with google is OK at times EFV; they will not ban you or anything ;)
As for whether it's okay to "disagree with Google," it isn't my place to disagree or agree with Google's business strategy; I'm not a Google stockholder, and--like everyone else on this forum--I'm not privy to the strategic discussions that go on at the Googleplex.
BTW, you may have heard that Microsoft wants to buy Yahoo for $44.6 billion. I wonder how long it will take Microsoft to recoup $44.6 billion via Yahoo advertising revenues? :-)
it =is= pretty obvious that you seem to "defend" (in lack of a better word) Google often, and that you are very active in replying to threads that carry a certain (negative) sentiment towards Google.
But you are right - this is not the Google forum, and you certainly have your reasoning. Fair enough.
Let's get back on track by just stating that Google has confirmed that they do have problems with social network inventory.
Sergey Brin says in the earnings call:
Now I do want to highlight though, we have had a challenge in Q4 with social networking inventory as a whole and some of the monetization work we were doing there didn't pan out as well as we had hoped. But we are continuing the efforts and we are still optimistic about future quarters.
[...]
We have a huge amount of social networking inventory, including the MySpace relationship, including of course Orkut, our own network, which is very, very successful and probably like 20 others, or something like that. I don’t know the exact number. But we have an incredible amount of this inventory and in fact, it varies quite a bit in how it all monetizes.
As Orkut seems to be counted as Google's "own network", I wonder whether Youtube is also counted as "Google property" or as regular Adsense publisher (probably with a sweet sweetheart deal)? Does anyone know?
As Orkut seems to be counted as Google's "own network", I wonder whether Youtube is also counted as "Google property" or as regular Adsense publisher (probably with a sweet sweetheart deal)? Does anyone know?
It would be interesting to find out but I doubt that information is public. We know there's a deal with MySpace. The combination of YouTube, Orkut and Gmail alone in a massive amount of ad inventory that could have a sweetheart deal so to speak. Hi5, Friendster and Fotolog(among others) are huge international networks that serve AdSense, who knows what deal is in place with them.
I'd also think it would be interesting to know how much the tougher stance on arbitrage decreased the advertiser inventory for the large social sites. It could be that the main reason Google over bid for the MySpace rights was it was counting on some advertisers that were cut out of the loop due to arbitrage methods.
I don't expect any of this information, but it would be interesting.
And yes, Google obviously has problems with social-network inventory. Whether that's a bigger problem than letting Microsoft or Yahoo control CPC advertising on MySpace is anyone's guess; in any case, that's a strategic decision that only Google can make.
A more relevant issue is what we, as publishers, can learn from this. To me, the message is clear: AdSense is far more valuable on niche sites with targeted audiences that may be interested in buying something than on general-interest sites (especially social-networking or community sites) where making purchases is likely to be the last thing on most users' minds.
[edited by: europeforvisitors at 6:16 pm (utc) on Feb. 3, 2008]
Zett, may I suggest that you avoid personal comments about other members and their motives, unless you're trying to sabotage the thread?
To your YahooSoft! comment, Microsoft wanted to buy Yahoo! a year ago when their stock was much higher. The fact that Yahoo! said no means that Microsoft is able to pay much less buy buying LOW and making it seem like they're buying high.
Every investment is a gamble, but there are solid reasons for this one.
I still think both sides could have done better had they built something more impressive and inspirational. But since they don't seem able to, an acquisition can help Microsoft achieve something they couldn't with branding.
[edited by: Clark at 6:26 pm (utc) on Feb. 3, 2008]
So let's really do that.
OK, let's spend less time talking GOOG and more time talking AdSense. :-)
For publishers who try to capitalize on the latest apparent trend (such as social networking), it's worth noting that MySpace is earning its $900 million in Google revenue over three years not from ad clicks, but from an upfront guarantee. Unless you've got enough traffic and market share to become a strategic partner a la MySpace, reality won't take three years to bite you where it hurts.
I mean, even if Google assured publishers that their deals are totally separate than the upfronts, they can't really carry it out.
How could they possibly not affect publishers? Quality ad inventory is going to places like myspace that would otherwise go to regular adsense publishers. How can they avoid that?
But don't you think publishers should be concerned that upfront payments to select publishers are subsidized by the inventory adsense publishers donate?
Concerned? Why? What do you propose to do about it? How does worrying about what other publishers are earning, or how much inventory they're getting, make you any richer?
If you're genuinely concerned that deals with major publishers like MySpace, The New York Times, etc. are going to impact you, then which course of action is likely to be more productive: bitching about the big corporate guys, or figuring out ways to maximize your long-term revenues from AdSense and other sources?
But don't you think publishers should be concerned that upfront payments to select publishers are subsidized by the inventory adsense publishers donate?How could they possibly not affect publishers? Quality ad inventory is going to places like myspace that would otherwise go to regular adsense publishers. How can they avoid that?
No, I don't.
First, we don't know that they are subsidized by our earnings.
Second the numbers being bandied about lack enough context to establish what they mean.
Third, these deals have been around since day one of adsense or close to it.
Fourth, it doesn't have to affect other publishers. It is you who is making some unstated assumptions which underlie your conclusions. If your assumptions are wrong, so are the conclusions. I'll let you guys figure that out, sort of.
Fifth, (and here's your hints) companies do not necessarily value short term over long term -- it's usually some of both in smart companies. It's simply not uncommon for companies, particularly cash rich companies, to accept lower profits today for market dominance tomorrow.
I'm afraid the lack of business experience and acument is showing on the part of people here who really haven't had enough rich indepth experience in how companies (large ones, particularly) operate.
Sixth, it's all beyond our control. If you need this "problem" with social networking to make your decision about what to do with adsense, then you are just a fool. It has no business value for me, or for you.
acument
Quality ad inventory is going to places like myspace
It is? Are you sure about that?
And are MySpace users clicking on "quality ads" in large numbers? Apparently not, or Google wouldn't be saying that its upfront guarantee was excessive.
If you need this "problem" with social networking to make your decision about what to do with adsense, then you are just a fool.
I think these problems are very relevant. We will see who is a fool in 2 years.
If you need this "problem" with social networking to make your decision about what to do with adsense, then you are just a fool.
I think these problems are very relevant. We will see who is a fool in 2 years.
Amen! Ultimately these discussions may help all to understand that banking your future on Google’s business decisions is not a good idea.
Amen! Ultimately these discussions may help all to understand that banking your future on Google’s business decisions is not a good idea.
The real risk is being a one-trick pony. When people talk about their "AdSense businesses" or "AdSense sites," I can't help wondering how long it will be until they're on their way to the knackers.
[edited by: Clark at 3:56 pm (utc) on Feb. 4, 2008]
I think these problems are very relevant. We will see who is a fool in 2 years.
There is no ACTIONABLE information in the issue. None. Knowing whether the social networking issue is affecting you or not gives you ZERO competitive advantage because it's out of your control
And, you can't possibly know anyway, you can only guess.
I run a business. I try to base my decisions and actions on hard data, and actionable data. Not gossip. Which is all this is.
I cut back on the use of adsense over a year ago, because it was clear that the return HAD to drop for reasons having nothing to do with Google's internals, but with advertiser and visitor behavior.
Key rule in business, and in life. Do NOT spend any time ruminating over things you have absolutely no control over, and cannot verify anyway.
Is this that difficult to understand? I dunno. The whole thing is so simple.
If your numbers aren't good enough to continue in adsense, don't. If they are, keep going. Why your numbers aren't good isn't all that useful or relevant IF the reasons aren't under your control AND can't be verified. Except for entertainment value (yours, and mine observing).
That's a...er...bottom line?!
The "one-trick ponies" are the shortsighted Web entrepreneurs who hope to get rich from riding on the big guy's coattails, exploiting weaknesses in the system (click arbitrageurs come to mind), etc. Just look at any thread titled "What are the high-paying keywords?" to see who the most obvious one-trick ponies and one-trick pony wannabes are.
I'd guess that the majority of adsense account holders, including many who write here, have no other equivalent ways to generate income than from adsense.
Adsense allowed a lot of semi-competent and incompetent people to make money in small or large quantities, simply by being in the right place and the right time.
Those who are truly good at business are still making money, as is demonstrated by the positive revenue figures posted here.
Thos who aren't make less and less as the industry becomes "smarter" and rewards incompetence less and less.
Which is my way of saying that I think people who obsess with things beyond their control really have nothing else constructive to do because they really don't have a lot of options. So, rather than leave adsense, they stay, and complain and obsess, because there is still nowhere for them to go.
After years on the board, I am amazed by the number of people who say: "I'm done with adsense" and then 6 months or some period later, are still using adsense, but complaining all the while.
..the one tricksters.
Exactly. The smart ones have left the dead horse.
Er....I don't think so. In case you haven't noticed, there are numbers of people posting their recent numbers who have experienced very nice revenue increases from adsense.
Some of us have diversified...we make about as much as we used to with adsense, but we've cut back and diversified, so our total revenue is higher. But we still love the revenue.
The dead horse is still paying my mortgage, buying my vittles, putting gas in the car, and otherwise supporting my lifestyle. Amazing since a) it's dead (at least according to you, but perhaps you run a glue factory), and b) it's lucrative despite the "huge" problems supposedly resulting from the social network. Amazin!
If you know of any other lucrative dead horses, please let me know.
PS. Anyone remember the posters about a year ago pronouncing google dead, shorting their stock, etc? Not a peep from them since.
But like you, I diversified quite a bit and have big plans for far more interesting revenue. If adsense goes to zero, I don't care...
Anyway, I wasted far too much time on this thread, so you guys can have the last word, I'm out.
I'd guess that the majority of adsense account holders, including many who write here, have no other equivalent ways to generate income than from adsense.
We have been working very hard in the last 6 months to implement our own payment system for a set of premium features, although this goes against current web2.0 trends.
