ZDNet Blog: "Google is really bad at monetizing content"

[unLTD]

Google's past 3 years financial trends points to the fact that company is shifting away from content adverting to search advertising in terms of its overall profits.

Google 2008 financials indicate that 66% of its 2008 revenues which grew 6% since 2006, came from Google's own search advertising and its search advertising business in the same period was 19 times more profitable with 39% profit margin than content advertising.

Content advertising revenue share for 2008 stands at 31% (down 7% from 2006) with only 4.5% profit margin.

From ZDnet.com blog:
[blogs.zdnet.com...]

Since 2006 its content advertising has dropped from 39% of revenues to just 30%. In addition, total content advertising fell 3% in the most recent quarter, year over year, yet search advertising grew 9%.

Google’s profit margin on content advertising is just 4.5%, many traditional media companies are much more profitable. And Google is moving away from content advertising because it can’t monetize it effectively.

[oddsod]

Google is already working on ways to make the network more attractive and productive for advertisers

And that's great. And they've put in a lot of effort into this in the past. Which should be reflected now in huge increases in profitability from the CN, not drops.

We'll have to measure the value of the effort they put now in by the results they achieve. And I'm rooting for them to improve the profit margins (but without cutting publishers' share, of course) ;)

The people running Google aren't stupid, and only a very stupid management team would say "Let's shrink our revenues and serve ads only on our own properties so we can have a higher profit margin"

Google's very aware of the vulnerability of so much resting on Adwords and so it's working on the other irons in the fire. So, given the right conditions, there wouldn't be anything stupid about saying let's drop the content network and focus on what makes money. It's after all about maximising total profit, not profit margin.

[signor_john]

...they've put in a lot of effort into this in the past. Which should be reflected now in huge increases in profitability from the CN, not drops.

Not necessarily. There's such a thing as investment spending. What's more, Google has always taken the long view. Remember when they introduced separate bidding for the search and content networks, when they dumped a bunch of arbitrageurs, when they redefined the click area in AdSense ads, and when they gave advertisers more control with placement targeting and improved domain filters? Those changes undoubtedly cut earnings in the short run, but--unlike, say, the "It's 9 a.m. and my CPM is down" AdSense publisher--Google has shown its willingness to sacrifice short-term profits for long-term performance.

Google's very aware of the vulnerability of so much resting on Adwords and so it's working on the other irons in the fire. So, given the right conditions, there wouldn't be anything stupid about saying let's drop the content network and focus on what makes money.

But the content network does earn money for Google. And it's likely to earn even more in the future as AdSense continues to evolve from its simple beginnings (a CPC text-ad network) into a platform that leverages DoubleClick, rich media, advertiser widgets, and whatever else has come/will come down the pike. Google has built an enormous platform for delivering ads outside its own properties, and I can't imagine Google walking away from that platform and ceding the bulk of the advertising marketplace to its competitors.

If members of this forum are looking for things to worry about, they should focus on matters closer to home, such as the value they provide to users and advertisers. The AdSense content network is unlikely to go away, but "AdSense businesses" may be an endangered species, just like the boilerplate, cookie-cutter "thin affiliate" sites that were all the rage half a dozen years ago. The days when AdSense advertisers had to take potluck and pay full price for clicks from any site, regardless of its content or audience, are long gone.

[Lexur]

And, please, do not forget Google suffered by this crisis but other advertising systems are shrinking right now or with enormous leaks and financial troubles.

If you have a medium/big site and you received CPM campaigns from media buying companies you probably know "anything is blocked now" or "there's now a few campaigns and are reserved for X, y and Z, you, know".

[filbiz]

I only have three questions. If there is no Adsense, where will Google put all the ads? in the search pages? How will it look like?

[signor_john]

If there is no Adsense, where will Google put all the ads? in the search pages?

Nope. Not enough room. That's another obvious reason why Google isn't going to dump a market-leading $5-billion-a-year business down the toilet.

[honestman]

Just as Google is optimizing right now, just as reasonable saving is starting to finally happen in the United States of Amnesia (as Gore Vidal called it), so too I think this is the time for all webmasters/website owners, etc. to work on optimizing their sites (in terms of both content and accessibility) for the long-term and simply assume that the content network will continue to plunge in the short-term at the very least. For those who have been diversified in terms of revenue, this is not such a big issue, though it does bring down the value of the "portfolio."

It really is not unreasonable to expect to see publishers' profitability from adsense go down at least as much as the stock market has in the U.S. and worldwide. But what has struck me most about the huge downturn in CTR was the very sudden nature of it all--well after the initial economic crisis. The continued demise of CTR is my main concern on all levels, and must certainly be so for Google.