Google Says Lowering EPC, Until Competition Arrives

[Surf_Dude]

A Google search for Google Financial Report yields G's 10K form -
http://www.sec.gov/Archives/edgar/data/1288776/000119312505065298/d10k.htm

On page 29, I quote two sentences -
"In addition, traffic acquisition costs as a percentage of advertising revenues will experience downward pressure in the future to the extent we enter into proportionately more AdSense arrangements with members to whom we generally have lower revenue share obligations. However, this trend may be offset in the future to the extent competition for arrangements with web sites that are existing and potential Google Network members increases, which would likely result in less favorable revenue share arrangements."

Sentence one translation -
"We will be paying lower EPC in the future, because we can".

Sentence two translation -
"When we get competition, we won't be able to do this".

Does anyone disagree with my "translation"?

[fryman]

I've read that paragraph 5 times and still can't figure out what the heck they are saying

[Design Agent]

There's not even any big words in there and its impossible to read..but Im guessing you got it right.

[Infiniterb]

And in an SEC filing, that makes perfect sense. They don't release those documents for us, they release them for share holders. It's basically saying that their revenues will be higher in the future unless there is high competition from outside sources (Yahoo and MSN). Once the pressure is put on, in order to keep advertisers and publishers happy, Google will increase their payout to publishers. The increased payout to publishers will, in turn, decrease Google's overall revenue share.

[anthonycea]

In addition, traffic acquisition costs as a percentage of advertising revenues will experience downward pressure in the future to the extent we enter into proportionately more AdSense arrangements with members to whom we generally have lower revenue share obligations.
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In other words, the more publishers they sign up means more supply, when they have more supply they can pay less to everyone for those clicks.

In a short supply situation you have to pay more.

(If there are only 5 hot sites and everyone is bidding up that space the publisher would get a lot more money, so as they sign up more publishers the advertisers bid less because they have more space everywhere and those "5 hot sites" are not so hot anymore).

More publishers = less CPM for everyone.

:rolleyes: :rolleyes:

[Homer]

I can confirm (in my case) this is happening. It started in January 2005. My EPC dropped by 50% and has never returned.

I would not call myself a major league AdSense publisher however my earnings are always 4 digits a month.

I certainly agree with your translation. I, too, have read these sentences and can't really determine exactly what is being said. You have summed it up correctly according to my situation...can't wait for Yahoo :)

[www.AmCy.org]

Does anyone disagree with my "translation"?

No arguments here. I think you got it 100% correct.

AmCy

[anthonycea]

You can bet that when the competition is real that only the best websites with the most traffic will get higher percentages and they will be contacted and given special deals by the ad network providers.

We all should demand that Google and the others drop the exclusive advertising relationship also so that we can test other ads and programs.

[Mia]

A Google search for Google Financial Report yields G's 10K form -
http://www.sec.gov/Archives/edgar/data/1288776/000119312505065298/d10k.htm

On page 29, I quote two sentences -
"In addition, traffic acquisition costs as a percentage of advertising revenues will experience downward pressure in the future to the extent we enter into proportionately more AdSense arrangements with members to whom we generally have lower revenue share obligations. However, this trend may be offset in the future to the extent competition for arrangements with web sites that are existing and potential Google Network members increases, which would likely result in less favorable revenue share arrangements."

Sentence one translation -
"We will be paying lower EPC in the future, because we can".

Sentence two translation -
"When we get competition, we won't be able to do this".

Does anyone disagree with my "translation"?

I think they are saying that as revenue shrinks from larger more traditional advertisers, ie., advertisers with hefty budgets, they will take on more of the lower budget advertisers, and at a reduced rate, ie., lower obligation.

Anyway, that is my take.

[anthonycea]

All advertising is based on "Cost per thousand", that is why the Super Bowl gets Millions of Dollars per minute.


Why? Because they have more viewers than any other program on TV.

So giant websites with real time statistics and demographic profiles on their visitors will be able to make special deals with Google and the other providers.

Average Joe webmaster will get the shaft and that is just the way it is in business.

[paymentapprovaltooslow]

To please shareholders, google needs more revenue to justify its high PE. By paying less to adsense pubs, google is able to acomplish this. However, I havn't had too much probems with CPC decline.

[david_sakh]

There's not even any big words in there and its impossible to read..but Im guessing you got it right.

It's gravy-speak. Indecipherable to all but spammers, telemarketers, and irritating business majors with sharp tongues.

[Bernard]

"In addition, traffic acquisition costs as a percentage of advertising revenues will experience downward pressure in the future to the extent we enter into proportionately more AdSense arrangements with members to whom we generally have lower revenue share obligations. However, this trend may be offset in the future to the extent competition for arrangements with web sites that are existing and potential Google Network members increases, which would likely result in less favorable revenue share arrangements."

Sentence one translation -
AdSense payout costs as a percentage of AdWords revenues will decrease as the percentage of low payout AdSense accounts grow.

I take it to mean "general" AdSense accounts versus accounts from large sites like Amazon.com & Ask.com which I'm assuming have negotiated special rates/contracts.

Sentence two translation -
When we get competition, we're going to have to increase AdSense payouts to maintain and grow the AdSense network.

Does anyone disagree with my "translation"?

Mostly, except the verbiage does not claim that they are lowering AdSense payouts to any individual members.

[Will.Spencer]

Does anyone disagree with my "translation"?

You are right on.

We are about to get squeezed. :(

[Arnie]

That's just temporary.
A couple of bigtime competitors would be healthy and will take place in the near future. The Ad market online is just in the beginning and it will take about five years before it grows to the size where it can be.
Google alone, no matter how big this company is or may grow, can't serve it all, thats for sure.

[vprp]

Sentence one translation -
AdSense payout costs as a percentage of AdWords revenues will decrease as the percentage of low payout AdSense accounts grow.

I take it to mean "general" AdSense accounts versus accounts from large sites like Amazon.com & Ask.com which I'm assuming have negotiated special rates/contracts.

Sentence two translation -
When we get competition, we're going to have to increase AdSense payouts to maintain and grow the AdSense network.

Bernard, I agree with your translation there. I think most of the growth AdSense gets will be from smaller "mom and pop" Web sites. These Web sites get smaller payouts than say, AOL gets.

[nevetS]

That's the way it works... If they need your site, they'll give you a bigger percentage. There has been plenty of speculation that more important sites get higher revenue from the same clicks. I'm sure there just expounding on the idea.

[Arnie]

Google needs a competitor now or else it faces the same lawsuit as microsoft did. Remember MS had to pay to set up a competitor.
Overture is running out, Yahoo and others didn't start yet, all the small ones are not considered to be a competitor.

[Infiniterb]

That's the way it works... If they need your site, they'll give you a bigger percentage. There has been plenty of speculation that more important sites get higher revenue from the same clicks. I'm sure there just expounding on the idea.

Would you say that sites ranking higher in the serps for a particular keyword would be classified as important? Based on their algo, of course.

[Arnie]

Google needs a competitor now or else it faces the same lawsuit as microsoft did. Remember MS had to pay to set up a competitor.
Overture is running out, Yahoo and others didn't start yet, all the small ones are not considered to be competitors.

[Arnie]

Seems like Yahoo is playing a waiting game, as longer they wait as bigger the pressure on G.

[vprp]

Well, I think it's already been publicized that certain partners receive larger payouts from AdSense. I think AOL was the partner in question I read about.

Does anyone know the timetable on when Yahoo! plans to get their offering out? They would seem like the likeliest challenger to AdSense since they already have Overture.

[paymentapprovaltooslow]

Seems like Yahoo is playing a waiting game, as longer they wait as bigger the pressure on G.


Yahoo won't be able to take on te' mightly adsense. The reason why is because google was first and they have such a huuge advantage.

[Arnie]

Yahoo won't be able to take on te' mightly adsense. The reason why is because google was first and they have such a huuge advantage.
I disagree. Yahoo is well equipped, but its just a bit of a strategic game at the moment.
If Google has the Monopoly in this business then its against the law. Yahoo knows that very well too. One thing we all know for sure that Yahoo lets overture go down, so that there is no competitor which furthermore could be harmful to Google. Or do you think that Overture made no profits?

For all of us it would be better if there's a healthy competition.

[paymentapprovaltooslow]

Cool username.

Anyway, with regards to the monopoly why hasn't anyone taken on Ebay? MOnopoly suits tend to be quite rare.

Overture made profits for yahoo, but overture advertisers are going to be wary banching out into content pages.

Yahoo branched into auctions..and well thier auctions...suck...badly.

I dunno time will tell I guess.

[miko67]

Only problem now is:

With 2 or 3 major players in the field we might not have a monopoly, but we still get an oligopoly.

This in turn means there is an overwhelming risk that the major players wil silently (and illegally) split the market between them through cartel arrangements securing them artificially high prices and low payments.

Still, one would think that three players is a hell of a lot better than just one :o

[vprp]

I see Google and Yahoo! as fierce competitors rather than partners. I think Google has proved that there are huge profits involved with search and contextual ads and Yahoo! would like to take the dominant position from them. So would MSN. Right now, I think Yahoo! is in the best position to challenge AdSense.

Overture brings in huge profits for Yahoo! and I'm sure they only want more.

It's not exactly easy to go after a monopoly, either. Look at Microsoft. Contextual ads is still an emerging market and although AdSense has a huge lead, I think Yahoo! or even MSN could get a piece of that pie.

[fryman]

A piece? How many of us are just counting the seconds for this to be released so we can test it out?

How many threads are created every day about this? People are going crazy and can't wait for Yahoo to jump in the market and let us compare.

My earnings with Adsense have gone down 50% this month, I don't know what the heck is happening, but it is just terrible, same clicks, maybe even more, but much less $$. I'd sure give Yahoo a good try.

[Bernard]

My earnings with Adsense have gone down 50% this month, I don't know what the heck is happening, but it is just terrible, same clicks, maybe even more, but much less $$. I'd sure give Yahoo a good try.

Fryman, I agree in spirit with your post, but earnings drops across the board for AdSense members could be attributed to: expanding AdSense network driving total clicks per day for AdWords advertisers too high (which in turn may cause them to lower CPC if they are still getting sufficient traffic) Google dropped the payout percentage Google adjusted (or has a continually adjusting system on) their smart pricing system so that the top performing sites get the best payouts. More sites in network = more competition for best payouts. Advertisers are just naturally driving CPC downwards as the "prestige" for being #1 is largely seen for the red herring it is and ROI is the name of the gameI'm sure there are other possibilities...

[AfterHim.com]

advertising revenues will experience downward pressure in the future

Seems pretty self explanatory to me...they want more money for the mothership and less for us.

From yesterday alone, my average cpc is down about 2/3 and has been going down the last week...

However, my clicks have been going up up up, so it is keeping my money about even.

I can't wait for Y! to finish and release their version...I'll be testing it from day one for at least a week or two.

[anthonycea]

All buy and sell prices are supply and demand related.

If there is a need for lumber to build homes the price goes up.

Google is signing up more publishers everyday so there is more supply and less demand for individual pages that webmasters produce.

It is really that simple. You have to build a better mousetrap to make money and have the best traffic figures to make it.

[Crusader]

I've heard complaints from various people that their adsense revenue have gone down the last couple of months. Guess this puts everything in a new light.

[Homer]

I've heard complaints from various people that their adsense revenue have gone down the last couple of months. Guess this puts everything in a new light.


The rumours you here are true...no doubt about it. If you can believe that my EPC is 50% less, Goolge is still the best paying program on the planet.

When yahoo or MSN comes out with a like product I suspect EPC will increase.

[Crusader]

I've gathered as much. I'm still a very big Google supporter so it remains to be seen what Yahoo will bring to the table.

[T0PS3O]

You are right on.

We are about to get squeezed. :(

It could also be part of a physcological game where they squeeze payouts now until the competition arrives. Maybe when Yahoo's Pub Network arrives they'll increase it back again to 80% of what it was so they seem generous. Or they cut certain big spenders a 'deal' where they'll get their high payouts back if they sign a special deal or something...

[Homer]

I subscribe to many Google products..I agree they are #1 and don't see this changing anytime soon.

My bigger concern is the 'monopoly' they have. Monopolies are illegal. If Google does not have competition...not good. We all remember what happened to BIll Gates a few years ago.

If this happens to Google guess where that leaves the AdSense publishers? Maybe this is the real reason Yahoo is holding out :confused:

[Mia]

Monopoly on what? There is no monopoly. To have a monopoly they would have to have a system in place where by you could not possibly use any other service. You can, and many do. There are tons of PPC services out there, Google is not the only one. It is hardly a monopoly. They just seem to have the best and most prolific at the moment.

[Crusader]

Google definitely needs some competition. Not only will it help us publisher earn more (hopefully), but it will also drive some new innovation in the advertising sector.

[anthonycea]

They have competition:

www.targetpoint.com

www.bidclix.com

www.bidvertiser.com

www.7search.com

Plus Yahoo and MSN, in addtion there are many more programs coming.

[Homer]

Monopoly on what? There is no monopoly. To have a monopoly they would have to have a system in place where by you could not possibly use any other service. You can, and many do. There are tons of PPC services out there, Google is not the only one. It is hardly a monopoly. They just seem to have the best and most prolific at the moment.

I hope you're right, Mia. Your point is well taken, but it seems there is NO comparable program out there :confused:

[anthonycea]

No other program has a spider yet Homer, but they will real soon when Y$ and M$ enter the game and others will also add the same spider bots down the road. :o

[T0PS3O]

Google definitely needs some competition. Not only will it help us publisher earn more (hopefully), but it will also drive some new innovation in the advertising sector.

More AdWords advertisers helps you as an AdSense publisher more I think. Google alledgedly already pays out up to 80% of our AW bids. If we get more competition when bidding for phrases it will drive up the PPC. That's where you benefit.

[anthonycea]

Only keywords that companies really want bad will go up in price :o

The majority will come way down as more websites come online everyday, it is a matter of supply and demand and more supply is added everyday, in addition there is no end in site to new blogs, forums, directories and portal sites that magazines and online newspapers put up.

[T0PS3O]

Only keywords that companies really want bad will go up in price :o

The majority will come way down as more websites come online everyday, it is a matter of supply and demand and more supply is added everyday, in addition there is no end in site to new blogs, forums, directories and portal sites that magazines and online newspapers put up.

That makes no sense at all.

You say correctly, supplu grows. New sites go online every day. New online ventures start every hour. A lot of them will advertise their stuff. AdWords is the #1 online Advertising program by far. So there is an increased number of AW advertisers. The actual phrases the want to trigger their ads doesn't grow as fast as the number of advertisers so more advertisers will be bidding for the same phrase.

There's no other outcome than the bid price going up. More advertisers also means you have a greater chance of not getting your ad on page one. So you HAVE to increase your PPC bids to stay on top.

Higher bids equals higher pay-outs (likely) for AdSense publishers.

[anthonycea]

When I was buying ADWORDS Google wanted me to spend $500.00 a day to get into the top spots, I got there in my keywords for .05 per click and limited my spending to $10.00 a day and never hit that.

So only a few selected words really pay anymore TOPS and you know this, why would Google make the statement they did if this was not the case.

More gas stations force costs down not up, so with more suppliers (Y$ & M$) coming in the game how do you expect prices to go up to publishers?

[T0PS3O]

Google's budget recommendation is a joke, we all know that.

Going from just G to G, Y and MSN is only a 300% increase. The pool of online advertisers grows a lot faster than that.

[anthonycea]

You can have a lot of advertisers, but if they are all like me and bid .05 and get to the top with that, how much can publishers expect to make TOPS :confused:

[T0PS3O]

You can have a lot of advertisers, but if they are all like me and bid .05 and get to the top with that, how much can publishers expect to make TOPS :confused:

Read my post above. You getting blind?

If 20 people bif 0.05 that means 8 will be on page 2 and 4 on page 3. They'ss see the crap results soon and bid 0.06. Now we have 8 on page one bidding 0.06. 4 on page 2 bidding 0.06 and 4 on page two bidding 0.5. And some on page 3. Now the 0.06 AND 0.05 people get poor results... So they bid 0.07...

ETC!

[mkeen]

They won't be like you, big companies with big budgets will/are paying crazy prices for keywords, PPC advertising is still in its infancy.

Yes its about supply and demand as you say in your earlier post Anthony, more web sites are joining publisher programs every day but more businesses are also joining the PPC networks. PPC advertising is still in the introduction/growth stage and I bet less than 1% of businesses use this as an advertising method.

[T0PS3O]

PPC advertising is still in the introduction/growth stage ....

Confirmed by their recent SEC filing showing us their growth in revenue from selling their Adspace.

[mkeen]

Read my post above. You getting blind?

If 20 people bif 0.05 that means 8 will be on page 2 and 4 on page 3. They'ss see the crap results soon and bid 0.06. Now we have 8 on page one bidding 0.06. 4 on page 2 bidding 0.06 and 4 on page two bidding 0.5. And some on page 3. Now the 0.06 AND 0.05 people get poor results... So they bid 0.07...

ETC!

Exactly, by the sound of your post Anthony it sounds very much like you dont understand how PPC works, all the 5c keywords are low quality words, how many ebay ads do you see when you search for things like "buy pc's online", "dental care", "car insurance" and "meso (cant spell it)"?

None?

Why?

Because those ads only come up on the 5c keywords.

[anthonycea]

TOPS no matter how you cut it the percentages will go down in the future, not up.

Remember the DOT COM BUST, well AOL, YAHOO and many other companies got hit hard by the last downturn in online advertising. Don't make me pull articles on it because you were around then.

There may be good times at the moment, but don't count on it forever, that is what I am telling you and I think that is what Google mentions in their statement to investors.

I hope that I am wrong so we can all make some money, I have seen what a downturn did in my offline business and it cost me a lot of money.

[mkeen]

I remember the DOT COM BUST also, venture capitalists throwing millions of £££ at total cr*p, I think people too many people thought the Internet was going to revolutionise just about everything.

I don't see the PPC business model going this way, PPC is one of the easiest advertising methods ever invented, you can track your ROI in real time, something not working? Stop it, somethings working well? Throw more money at it.

[T0PS3O]

TOPS no matter how you cut it the percentages will go down in the future, not up.

You're still not reading.

Even if the pay out % goes down, higher PPC bids could still mean increased absolute pay-out to publishers.

I wouldn't be surprised if G, MSN and Y fix the pay out behind the scenes and let exactly happen what I just described - higher PPC bids so they all get more out of it.

[anthonycea]

OK, so everyone of us puts up 20,000 automated pages with some script just to generate content, how is that going to increase payouts :confused:

[mkeen]

You're still not reading.

Even if the pay out % goes down, higher PPC bids could still mean increased absolute pay-out to publishers.

I wouldn't be surprised if G, MSN and Y fix the pay out behind the scenes and let exactly happen what I just described - higher PPC bids so they all get more out of it.


I can't see that working really, too many people would be involved in such a highly illegal activity.

Look at other cases of price fixing, usually one of the companies involved in the cartel comes clean about it, the other companies get the most punishment and the company that grasses gets let off lightly.

In the end the other companies lose there reputation and the company which grassed cleans up all the ex customers of the other companies.

[Will.Spencer]

The laws of supply and demand suggest to us that we should convince more advertisers to sign up for AdWords. :)

[anthonycea]

You sign up and start the bidding at $5.00 per click Will :o :D

[paymentapprovaltooslow]

I remember the DOT COM BUST also, venture capitalists throwing millions of £££ at total cr*p, I think people too many people thought the Internet was going to revolutionise just about everything.

I don't see the PPC business model going this way, PPC is one of the easiest advertising methods ever invented, you can track your ROI in real time, something not working? Stop it, somethings working well? Throw more money at it.


Adwords blows. I tired it many times and the ROI is bad or you dont get clicks. You're paying for a friggin click! The whole model seems stupid from the outside. Tried everything to make money online. I now make thousands/ month in the internet via adsense, selling the adsense system, selling websites, and various other digital goods. bu it wasn't easy to get started. The internet is far from dead.

[Homer]

Adwords blows. I tired it many times and the ROI is bad or you dont get clicks. You're paying for a friggin click! The whole model seems stupid from the outside. Tried everything to make money online. I now make thousands/ month in the internet via adsense, selling the adsense system, selling websites, and various other digital goods. bu it wasn't easy to get started. The internet is far from dead.


It really depends on the price point of the product. Adwords can be amazing with some products. I will agree with you if you are selling a $19, or so, product
But if you have to spend $1000 to land a $100000 project it's worth it.

[paymentapprovaltooslow]

I see. Thats why those meso lawyers spend $50/click.

[Arnie]

Companies which pour money into adwords do it mainly for one reason, to pay less tax and do it that way where they can gain more popularity, talking about the big ones, they don't expect a direct return of this investment.

Look at the Magazines and Newspaper ads. Quarter pages for tens of thousands of $$$ a day. That business has already partly switched to online medias and is still on the raise.
Example: When you open New York Times, - how many ads which are very costly can you find and how many pay attention to these ads? I think most of the readers just throw away the classified section without even having a look at it.
The advantages of online medias is that it's far cheaper and people look more at ads then in magazines or newspapers.

Another reason why online medias will be still growing is Video, TV. Once further developed online commercials will jump up like never before. This market is just at the beginning and as for now the tip of the iceberg.

For the small adwords customers.
The biggest advantage they will gain is when google and/or others will have developed the local search markets better. Google is working on it and I guess others too.

So there is for everyone a lot to gain. Also for publishers. We just have to make some adjustments from time to time in this upward moving market and opportunities.

[szynka]

Woho Arnie!!! thats great post!! so big advertisers will be happy for me to take money from them, thats good!! And they eaven earn on that, that i'l earn from advertising.

Does it mean that advertisers with 50k/100K budget (daily :D) don't care about CN (converison) on google adwords?
So google don't care, advertisers don't care, i don't care haha, thats cool.


Anyone knows how much money google earns from big advertisers? and how much from small?

[Homer]

Companies which pour money into adwords do it mainly for one reason, to pay less tax and do it that way where they can gain more popularity, talking about the big ones, they don't expect a direct return of this investment.

True Arnie but I would suggest to you that there are more users like me...expecting ROI. No money to burn here :)

[JesseM]

No well-run company will ever spend money just to save in taxes (unless you're talking about a tax credit).

If the company's tax rate is 30%, they would be spending $1 to save 30 cents. Doesn't sound like good math to me.

They would have to be confident that their rise in popularity would offset the after-tax cost.

[Mia]

No well-run company will ever spend money just to save in taxes (unless you're talking about a tax credit).

If the company's tax rate is 30%, they would be spending $1 to save 30 cents. Doesn't sound like good math to me.

They would have to be confident that their rise in popularity would offset the after-tax cost.

Yes it will! However, not on advertising. They will usually spend it on dividends (pay out dividends to shareholders), or some type of expansion. WHY? Because the longer it sits in the bank, the more it gets taxed.

[mjewel]

Paying dividends doesn't reduce taxes. A company pays taxes on earned income - a dividend isn't an expense. If the company pays a dividend, it can result in double taxation because the shareholder is then responsible for taxes on the dividend.

[Mia]

Paying dividends doesn't reduce taxes. A company pays taxes on earned income - a dividend isn't an expense. If the company pays a dividend, it can result in double taxation because the shareholder is then responsible for taxes on the dividend.

Yes it does.. It reduces over all income taxes. If you pay out your profit in cash/bonus/dividends to share holders, shareholder assume the tax burden, ie., personal income tax. The corporation does not. The tax burden I am talking about for the corporation is having the cash sitting in the bank. If it sits there, it can be taxed over and over and over again. The best thing to do with it is to pay it out to share holders, or aquire something to avoid being taxed again.

[Homer]

mia, Jesse and Arnie are all correct. But I still think the majority AdWord advertisers are simply looking for some kind of ROI.

Getting back to the origators post 'Google lowering EPC because they can' is quite believable AND my earnings support this theory. My serps are up, my keyphrases pay decently all other indicators are otherwise AdSense optimized, EPC is down 50% since Jan 2005.

I think this is a result of Google doing it...because they can. I am still grateful and pleased with my results. That in mind, nothing compares, and they know it.

Until there is some genuine competition this is their prerogative.

[mjewel]

All the adword advertisers are looking for a return on their investment. They may lose money while building brand awareness, or they may not get the ROI they were looking for, but they are not buying adwords to lose money. That's absurd.

[mjewel]

Mia, you're wrong. A corporation pays taxes on its earnings. Whether it then pays out the profit in a dividend or holds on to it makes no difference to the corporation. Expenses reduce profit. Dividends are not an expense. A dividend is a payout on earings AFTER taxes. There are S-corps and LLC's which allow for a pass through, but it's still not an expense. I suggest you read up on corporate double taxation.

[Mia]

I think you are misunderstanding what I am talking about. I am not talking about earnings for a given year, I am talking about retained earnings that go unspent, and sit in the bank. They can be taxed, over and over and over again. However, if you pay those earnings out in the form of a dividend to share holders, you escape having those earnings taxed again, and again, and again. I'm in the US if that helps... Things may be different in your neck of the woods.

[chachi]

I think Surf Dude got it right. Originally when Overture/Goto was the only game in town, they were able to negotiate great "splits" with publishers like Yahoo. When Yahoo and the rest of the big boys realized that without their traffic, Overture was nothing, they squeezed OV on their splits and they went from making 50% to a lot less (per click).

traffic acquisition costs = how much they have to pay for traffic or how much they pay their partners/publishers to run an ad on a page

downward pressure on TAC as a percentage of advertising revenue = As more people sign up for adsense as a publisher, they will have excess inventory/supply (as AC pointed out) and this will drive prices that they pay property owners/publishers down

[Arnie]

The bigger corporations -
If there is a constant flash of ads the conversion rate totals around 4% according to Unilever years ago.
Coca Cola, as everyone might know, stopped one time the ads because they thought they are well known already. Yes they saved billions first and lost more later to Pepsi and others.
I also said these kind of companies don't expect a direct return of investment, because their policy towards advertisement is different and must be if we compare it with small businesses where most are needing a direct ROI.
I also mentioned that they are after higher popularity which means also more sales then, but its not (going) to be directly.

Most of smaller businesses must concentrate on local markets in order to get a decent result for their ad campaigns and if they are to survive with their business.

Actually there are more things to say about this, especially some exceptions of standard rules in advertisement business, but I think its not the right time in the right place now.

Everyone must realistically figure out where they stand and act wiseley.
Advertisement is not only - seducing - to customers but also to advertisers (useing the wrong way).

[JesseM]

Yes it does.. It reduces over all income taxes. If you pay out your profit in cash/bonus/dividends to share holders, shareholder assume the tax burden, ie., personal income tax. The corporation does not. The tax burden I am talking about for the corporation is having the cash sitting in the bank. If it sits there, it can be taxed over and over and over again. The best thing to do with it is to pay it out to share holders, or aquire something to avoid being taxed again.

Dividends are not deductible to a corporation in the U.S.

If cash sits in a bank account it will not be taxed over and over again unless you're talking about the interest earned from the cash. The principle will never be taxed again. A corporation is taxed based on its accrued earnings for its fiscal year. The IRS will not tax those earnings again if the corporation doesn't spend the money.

[hdpt00]

Mia: You better learn a little about C corporations before you come posting here. Almost all public companies are C entities which is the default corporation status. The owners of the company get stock, if it is a private corporation it is probably the founders, initial money backers, etc. If it is a pubic company it can be anyone: you, me, institutions, etc.

Now a company pays taxes on all net earnings (that is profit - expenses). Now if they pay dividends to the shareholders, that is taxed as personal income to those owning the stock as well (hence the popular double taxation which can be avoided via LLCs, S corporations, etc.). They pay dividends from profit; otherwise they'd go in debt which I suppose is possible but not practical, not sure. It is POST TAX earnings from which dividends are paid (once again, double taxation, see above). If the company keeps the money in the bank post tax, they aren't taxed each year except the initial year they earn that X amount of dollars. Now what they are taxed on year by year is interest, which is of course profit to the company.

What you are explaining is if I had a bank account with $1,000 in it and got taxed 23% each year it would eventually go to $0 as the years went to infinity.

Not to put you down, but do a little thinking before you post, what you are saying it obviously wrong otherwise the government would never be indebt in the situation they are always taxing people’s money even after the year they earn it (except like I said on interest earned).

Now I’m sure there are some fancy ways around some of this stuff, etc., but this the basics.

[anthonycea]

It is called income tax, so that means that only the income is taxed, correct?

If a corporation shows no income that equals zero tax most of the time.

Most owners of C corporations take all of the corporations income out in salary & benefits anyway, since the money is taken out of a closely held corporation in this manner in addition to major deductions many C corporations have zero tax liability.

We need to start a thread on this in General Chat or General Business if we want to discuss this very important corporate structure issue, someone please start it so we can fight about it.

[Mia]

Dividends are not deductible to a corporation in the U.S.

If cash sits in a bank account it will not be taxed over and over again unless you're talking about the interest earned from the cash. The principle will never be taxed again. A corporation is taxed based on its accrued earnings for its fiscal year. The IRS will not tax those earnings again if the corporation doesn't spend the money.

Yes it will. I am not talking about interest.

I give up.. You all win. I must be wrong. I am no going to try and get that money back...

[JesseM]

Most owners of C corporations take all of the corporations income out in salary & benefits anyway, since the money is taken out of a closely held corporation in this manner in addition to major deductions many C corporations have zero tax liability.

It's true that owners would like zero tax liability, so they try and give themselves as large a salary as possible (avoid double taxation where the corporation pays tax and distributes the earnings to the owner as a dividend, who then has to pay taxes on that), the IRS looks very closely at the reasonableness of salaries of corporations - especially privately held ones, so how much you pay yourself is definitely an issue for a CPA to be sure.

We need to start a thread on this in General Chat or General Business if we want to discuss this very important corporate structure issue, someone please start it so we can fight about it.

This is also true ;)

[anthonycea]

JesseM please do start that thread and leave a link here, you look like you could lead it well, thanks :o

[JesseM]

Anthonycea, I think I smell a dying thread - I'll just let it die here ;)