Google states adsense profits will be squeezed in 2006

[mjewel]

"Search engine Google disclosed in a filing with the Securities and Exchange Commission late Tuesday that statements about sales projections were inadvertently posted on the company's Investor Relations Web site during its analyst day presentation on March 2.

The company said in the filing that slides showing that Google expected revenue to grow from $6 billion in 2005 to $9.5 billion this year and that profit margins in its AdSense business would "be squeezed in 2006 and beyond" were part of notes prepared during the fourth quarter of 2005 for an internal strategy presentation and were erroneously included in a slide accompanying the analyst day Webcast."


Money Magazine



I guess they are anticipating sharing more with publishers as YPN and MSN enter the market.

[bargainr]

I've heard early reports that YPN has been very generous in its revenue sharing (at least people are finding they earned more with YPN in some keyword "categories")

I'm glad to see "profit margins" squeezed as opposed to "revenue," because the former is good for us.

[Elearn-uni]

Originally Posted by mjewel

I guess they are anticipating sharing more with publishers as YPN and MSN enter the market.

Maybe not,,, perhaps they are seeing the effect of pricing policies which are driving some web-owners to seeks more profitable uses of space.

I think the trend has been set now and G adwords users are busy taking advantage of the extensive cost-saving features now available. Combined with smart-pricing this will force publishers to defect as rates for alternative ads become more attractive.

I think G can turn it around, but I doubt they are in a position to increase the payouts unless they charge significantly more for Adwords-clicks. Difficult for them because so many folk are expert manipulators of the Adwords system now and G seems intent on getting rid of folk who in turn manipulate adsense to the degree where big-click money continuously flows through the system (Opinion not fact).

While affiliate ads benefit alot from adwords at the moment, adsense ads are close to being debunked by many, especially those who depend on revenue from ads. Vicious circle really and G could end up losing big time as they earn a cut from the overall revenue generated from adsense clicks.

Might sound nuts, but in a way, by discouraging made-for-adsense sites, G is losing revenue for itself and at the same time depreciating the net worth of a whole raft of advertisers who might perceive the lower number of clicks = lower conversion opportunity, hence will want to pay even less for ads. If this carries on, adsense clicks will be worth less than paid text links or even worse, less than banner/affiliate ads. Many publishers are already seeing this trend.

One thing that G seems to like doing is prejudging buyers before they get a chance to shop. By showing lesser value ads or discouraging sites from displaying ads, the recipiant sites gain less traffic and consequently fewer potential buyers.

I think G are incredibly clever folk,,,, but when it comes to judging human-nature, maybe they are getting too clever and consequently changing the landscape of both buyer and seller intuitiveness. eg 'will a guy looking for tennis balls, be interested in buying a racket? or perhaps will they be potential buyers for chalk, wrist-bands, headbands, sneakers, tickets for a local match, club membership, tuition, trophies, prize-engraving, sports-news etc.' G can't yet cover all of the associations if the words aren't directly associated with the keyword -tennis-.

By attuning themselves to (example keyword) tennis balls as accurately as they do, G effectively forces many advertisers to miss opportunities to be presented to impulse-buyers actively researching other interesting related articles and sites that are not apparently focussed on 'tennis balls' or closely keyword-associated.

I think its factors like this that lead to the outlook you alluded to.

[initialdheaven]

NOOOOOOOO
that's not good,
my eCPM is already dropping day to day

[mjewel]

I don't believe visitors go to a site for the ads. It might look like google is cutting its own throat by discouraging MFA sites, but they are more concerned with the quality of search results. Returning search results based on the site running adsense isn't a good for their business model long term. I used to be involved in leasing prime retail space in large regional shopping malls. Landlords charge different prices per square foot based on what the space is going to be used for. A jewelry store, shoe store, or food court will pay a lot more money per square foot for the same space operated by a clothing store. A landlord could make 5X the amount of money by leasing to every jewelry store that wanted to go in, but then the tenant mix would suffer and it wouldn't be long before the consumer stopped coming to the mall.

Google would certainly make more money short term, but the people I talk to are already sick and tired of seeing search results of crappy sites thrown together just to run adsense. The consumer will jump ship as soon as someone else can produce better search results (some claim yahoo is already doing so). I think the future is bright for quality content sites running contextual advertising and bleak for MFA sites. JMO.

[kneukm03]

I am pretty sure that they are talking about having to share more money with the publishers. Notice that at the same time they say profits will be squeezed, they predict revenue will go from 6 to 9.5 billion. That sounds like they think they will get more publishing revenue, but have to give up a higher cut of it.

[GADOOD]

It goes without saying Google will have to do something to keep publishers onboard, and that can simply and only be an increase in the share. They can't raise advertising costs.

Google may be able to keep advertisers onboard with smart pricing that offers them lower costs for adverts, but can they keep the publishers who are losing out on revenue because of smart pricing? Nah, many will jump over to YPN! where smart-pricing isn't an issue (although I know very little about how YPN! works these days.. I'm going on what I know from a few years back and how advertising worked on Overture etc..)

Google have been sitting pretty these past few years with no competition and the cash cow period is over - here comes the saturation with YPN! and AdCentre and it's time to reward publishers with more then just branded Google Christmas gifts.

Pete

[ElvisFan]

OFF TOPIC... any one know when Yahoo will be going international... it seems like they have been in beta for so long now... would love to give them a go but alas Australia is still not included..

[GADOOD]

Hey ElvisFan,

I bet you can't wait!

Pete

[ElvisFan]

Waiting... waiting... waiting... they have emailed three sign ups... but no indication when they will be going international... shame as most of my traffic comes from the USA...

[forumbulge]

Im waiting too.
Us Aussies always get the raw end of the deal when it comes to PPC and affiliates.

[projectw3]

Originally Posted by ElvisFan

Waiting... waiting... waiting... they have emailed three sign ups... but no indication when they will be going international... shame as most of my traffic comes from the USA...

I've been waiting too. When they first launched the beta, I went straight to signup, not realising that it's for US residents only.

They approved by application! LOL
But when I clicked on the link to activate the account, I realised that it's for US resident only and till now...I'm still waiting for it to get out of Beta...

[Amin]

Hey, have you read this?

http://news.yahoo.com/s/nm/20060309/...ickfraud_dc_11

[Elearn-uni]

Originally Posted by Amin

Hey, have you read this?

http://news.yahoo.com/s/nm/20060309/...ickfraud_dc_11

That could put a spanner in the profits expectations! also shows how damaging maverick click-fraud is to the industry. Big G and the others will most certainly be tightening up against fraudsters as this sort of loss can't be tolerated over the long term if it continues!

[brecht]

wow that's some serious bad news, Google won't stand for this in the future.