
The Massive Mystery In Google's Finances  - Straubiz
http://www.siliconvalleywatcher.com/mt/archives/2011/07/goog_analysis_p.php
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patio11
Some combination of:

1) Panda, which redirected hundreds of millions in revenue from some content
farms to other parties (including, likely, the ether) which do not show up on
Google's books

2) Google is being increasingly aggressive about monetizing the Google SERPS.
More ads in more places with more prominent billing. Other sites on the
Internet have not been aggressively up-monetizing principally because they
have less room to do so. Google has a cash cow and they've only really been
working one or two of the squeezable portions, somewhat halfheartedly.

3) Google is cannibalizing the organic results for high money verticals, for
example with consumer finance comparison products. Why have Citibank pay an
affiliate $200 to buy $160 of AdSense ads to pay Google ~70 when Citi is
perfectly happy to pay Google $200 directly?

4) Routine optimization works. Google+ gets all the ink, but Google is keenly
aware that they have two products: core search and AdWords/AdSense. If you
thought Circles got some programming chops thrown at it, pretend a 1%
improvement was worth billions and you had infinite R&D resources.

5) Something else entirely.

~~~
nikcub
If Google ever does end up facing an anti-trust trial, your second point will
likely form part of the case against them. This could be considered direct
evidence that Google are using their dominance in search to favor their own
properties over others.

~~~
aneth
It's not illegal to use dominance in one market to enter another. That's
called good business.

Antitrust requires monopoly, which google does not have. There are many
competitive and successful ad networks and search engines, and there is no
lock in to the search product.

~~~
nikcub
I don't agree with the entire concept of anti-trust, let alone support any
case against Google - but I can see it happening

~~~
chopsueyar
Yeah, Standard Oil and U.S. Steel were pretty awesome.

Without robber-barons, we would have a dearth of philanthropists.

~~~
MaysonL
Bullshit.

Yes, some of the robber-barons were and are philanthropists.

But robbing to give it away is not much more moral than robbing to spend it
yourself or give it to your heirs. Both are still theft.

For examples of modern non-robber philanthropists, see H & P, Buffet, et al.

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gojomo
The 'black box' of AdSense payout rates has long given Google has a lot of
discretion, checked only by publishers' other alternatives (credible threat of
switching) and Google's strategic goals.

Perhaps the next-best alternatives to fill the same space aren't paying as
much. Perhaps Google was strategically _overpaying_ AdSense partners for a
while, to achieve critical mass (of advertisers and publishers) and forestall
the development of competitive networks.

Now, having achieved an enduring dominance in this two-sided returns-to-scale
market, they're dialing back their AdSense payments. Only the emergence of a
strong alternative would prompt them to continue paying the same premium that
was offered during the capture phase.

(And even if Google thought a competitor of similar scale was likely to arrive
– eg Facebook – they might want to continue charging a lot for their market-
making, building a large warchest, until the competitor arrives. Then, crush
the upstart by dynamically charging very little, making AdSense extra-
attractive for exactly those advertisers/publishers of greatest importance
against the upstart. Similar to how a hundred years ago, Standard Oil was
accused of using targeted rate changes to undermine upstart competitors.)

Maybe ad-blindness (if not outright ad-blocking) is spreading more widely
among the masses, especially in AdSense scenarios. Maybe AdSense was only ever
meant as a moat to protect AdWords from possible network-of-ads competitors.

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Matt_Cutts
Not sure if people saw the comment that someone left on the original thread:
"Seriously? It is because of the Panda update and the resulting shift in
traffic away from ad-ridden low-quality sites and towards higher quality sites
that often haven't yet been optimized for ads in the Google network. They've
addressed this directly in both of the last two earnings calls and have said
they expect the effects to be largely transitory."

~~~
mapgrep
If that's true then come out and say it's true. Don't be coy. No, really,
don't: You can't have it both ways, implying the original author is somehow
dumb without being willing to stick your neck out enough to say it yourself.
Pointing to a random anonymous internet comment is weasely.

~~~
esrauch
Except he might not know that it's true, he was just drawing attention to an
interesting comment.

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Smrchy
We are AdSense premium partners and have seen our revenues nearly cut in half
while our page views remained constant. I can safely say this is due to the
fact that a lot of our visitors use ad block plugins. I can't blame them -
some ad formats are annoying enough to justify ad blockers. Unfortunately
Google does not offer a way for us to receive ads on the server level and
integrate them into the page content, bypassing the ad blockers - like Google
does it on his own properties.

~~~
forcer
We too are getting some significant revenue from Adsense. The income has been
stable for last 2 years. It dropped by around half as well in last 3 months.
It is worrying. I am not sure if ad blocks are the cause when the drop has
been quite sudden.

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happybuy
Isn't it true that Google doesn't actually tell advertisers what % of the per
click advertising revenue they are paid?

Its amazing that after all these years we have learnt to accept this black box
and trust Google is somehow paying advertisers a constant percentage.

It's likely Google wanted a bit more revenue for this quarter so decided to
pay advertisers slightly less of the cut. Wouldn't surprise me if this becomes
more commonplace in the future as Google keeps being tempted to improve their
profits.

~~~
jonknee
Publishers can log in and see their current split. It's in account settings
and I'm currently getting about 70% with the "AdSense for Content" product
which is what I use. If you use the Google Analytics hook-in you can get very
detailed statistics about which pages/visits are paying you what too.

------
dirtyaura
Two wild guesses:

 _Video ads_ \- They finally figured out efficient video ads and have turned
YouTube from a loss leader to a money-making machine

 _Mobile ads_ \- Do GMail and other Google apps on Android already show ads?

~~~
growt
I think the first one might be true. I'm seeing ads on almost every video now.

~~~
smashing
I am using adblock plus on firefox. I haven't seen an ads for a long time.

------
Revisor
Google has become a publisher and an affiliate marketer, dabbling in
mortgages, loans, flight search, even clothing (Boutiques.com). The search
results are clobbered more and more with results to Google's own properties.

Less long tail, more Google properties, outprice and drive out the small
enterpreneurs. That's the reason.

Have a look at the screenshots in this article, especially in the second half

<http://www.seobook.com/category-killer-domain-names>

Don't mind the name, but read it anyway, Aaron Wall is today probably the most
inquisitive watchdog of Google.

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binarymax
This is a wild guess, but what about partner sites' changes also having an
effect? The NYT implemented a paywall - possibly resulting in a significant
reduction in adsense income?

~~~
Iv
Wouldn't that imply less revenues for Google as well ?

~~~
jupiter
Not if they shifted traffic to their own free inventory

~~~
chopsueyar
Can you elaborate?

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notintokyo
Maybe these are mobile searches.

~~~
binarymax
Good point, half a million android devices are being activated daily
apparently. Free apps with adsense on all those devices is a possible
explanation.

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andrewtbham
I manage an adwords campaign for a highly competitive local search term and we
are getting gouged because of layout changes. about 5 or 6 months ago google
added a local map on the right column and lowered the ads beneath the map. the
results has been you have to bid much higher and pay more for less.

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fonosip
As far as I know google pays 69% of revenue to adsense partners. But when they
need extra money they can still use the highest paying ads for themselves,
sending them to gmail, youtube.

So yes, google is in control. Adsense partners are not.

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chopsueyar
Devil's Advocate:

Could it be the ad-revenue is down overall, and this is an accounting game to
prevent GOOG stock's price from dropping?

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Tichy
Maybe they were simply better than their partners. Is it really a mystery?

~~~
jeswin
Nope. Massive mystery. :)

Every time I see such titles on HN, I worry a little. We should down-vote such
links; I have seen way too many sites become infested with trolls and link-
baits, and such titles hitting front page is just what gets them excited.

No offence to the poster. But maybe we should all summarize things
objectively.

~~~
chalst
I voted up the story because it is a very good question, but the title is
awful, as you say. Something like "An unexplained anomaly in Google's Q1-Q2
earnings" would have been better for our site.

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teflonhook
Now we know how Panda determined low quality sites. They looked at the click
through rate and cpc rates for adsense ads. If the market didn't click on the
ads google served, then they mustn't have been relevant to the content (or
more importantly, the content isn't relevant to the ad. IE it's low quality.
Furthermore, if the market wasn't prepare d to pay much for the ad, it must be
for content that's low value.

Basically, google has redirected traffic from low paying adsense pages to high
paying adsense pages for those keywords.

Our site was hit hard with the last panda update, losing 30 percent of our
traffic. We have two main types of pages that are quite similar which
constitute our site.

Which pages were hit? Only one had google ads on it. Those pages were hit, the
others were untouched.

So in their efforts to steal revenue from their partners the corollary is now
true:

Put google ads on your site and run the risk of getting deranked.

