Schmidt: Someday, AdSense Publishers May Know Google’s Cut Of Ad Revenues

benfremer, September 17th, 2009 at 10:59 pm ET:

Just a note — it’s not quite entirely a black box . Using Google’s quarterly earnings reports, it can be estimated that they pay out about 80% to 85% of that ad revenue to publishers.

It looks like that was covered earlier here: http://searchengineland.com/google-pays-out-over-1-billion-to-adsense-publishers-in-q1-2007-11034

In their filings, I think they call the numbers “Network Revenue” (what they make from the 3rd party / non-Google.com sites) and “Traffic Acquisition Costs”(primarily payments to Adsense publishers by my math…though that number probably also includes some browser-default-search-engine deals).

I used to think it was like a 50/50 split or worse, and was happily surprised to see it apparently so high instead.

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Andy Atkins-Krüger, September 18th, 2009 at 4:32 am ET:
Premium member since 06/2009

Just for info – Yandex in Russia shares its earnings with publishers – so there is a precendent.

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EnterpriseSEO, September 18th, 2009 at 1:14 pm ET:

There are a lot of professional SEOs like myself that have been reading forums for years and never comment. We read to stay informed but don’t have any need to promote ourselves or our services. But this B.S. response finally made me register.

Eric Schmidt seriously has the audacity to question why people want more transparency? Google is one of the ONLY businesses that work this way. Virtually every other advertising company tells you your cut. Businesses large and small survive on the ability to generate and monetize their traffic so having predictable cash flow IS VITAL. But Schmidt dismisses these people that want to run their company like a real business and plan for the future.

Google is basically saying, “I’m going to sell your traffic and pay you every month but I’m not going to tell you how much you are going to get. But we have the most advertisers so anything we give you, you should be happy with!”

They add in things like “smart pricing” to make the black box even bigger because now they can say (based on some criteria they invent) that the traffic you sent was somehow less valuable than other traffic you send because maybe it didn’t convert for the advertiser. Never mind the fact that it could actually be the advertiser’s service, offering, or ability to close the deal that likely affects this number. In many cases there isn’t even a conversion at all. People often sign up for adwords just to drive traffic, not to sell a product or service, so how do you calculate the “quality” of traffic when there is no conversion available?

But all this aside, it is the impudence of Eric Schmidt insulting our intelligence as if we are the idiots for even questioning the almighty Google. He gives excuses about them “always changing” and being “frozen in time” which is COMPLETE B.S. How do I know? Because I am a senior SEO for a billion dollar company and we know EXACTLY how much we get from Google. We renegotiate our contract with them every two years! So if Enterprise level accounts know what they are getting despite them “always changing” then why can’t every other client?

If Google wants to do a flat rate, fine. If they want to do a ladder system where your percentage goes up with the more traffic you deliver, fine. But whatever it is, at least you know where you stand. At least as a business you can plan for your future based on some type of predictable outcome and estimated revenue and you can compare the various monetization opportunities available. It may very well be that Google is still the best method to use, but these excuses as to why they aren’t transparent are just insulting every webmaster that uses Adsense.

Danny, I’ve been following you for many, many years and have a lot of respect for the contributions you’ve made to the industry, but I was really hoping you would have called him out on this. This was an outright slap in the face.

Make no mistake about it, 90% of the people aren’t “happy” as Eric suggests. There just isn’t a viable alternative right now so we put up with it. There WILL come a day when Google does have a legit competitor and they had better be very careful not to drive away the same people that helped BUILD their company back when they were the underdog with the “do no evil” mantra.

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Stupidscript, September 18th, 2009 at 5:08 pm ET:

EnterpriseSEO: As a guy responsible for multiple millions of dollars worth of Google advertising, I feel your pain. Also, I agree that Schmidt’s comments could easily strike a nerve. But there are more sides to the story than you are acknowledging.

There are several obvious players: Google, the advertisers and the publishers. There are no problems with predicting the behavior of these people, because they all have strictly proscribed activities they can take advantage of, and with rare exception can be counted on to remain stable.

The problem players are the cheats. As explanation of why they would gum things up for you if Google flat out told you how the split worked:

If I want to know how much my competitor is currently paying for a PPC click, how would I go about doing that? Google won’t tell me directly. Harvesters can’t tell me. My competition won’t tell me. There is no publicly available data that will give me that info.

So I put up a little website under an assumed identity, get myself an AdSense account, load up my pages with content that triggers my AdWords ads plus those of my competitors.

Now, when someone (me, because I really don’t care about click fraud penalties) clicks on one of my competitor’s ads, I see that I have just been paid $0.85, and Google has already told me that they split clicks with me 15/85, so I now have solid data that tells me that my competitor paid $1.00 for that click. I can repeat this many times and get an excellent snapshot of my competitor’s campaigns, and begin to undercut them with confidence.

If there is a well-known split formula, it WILL be gamed. The only protection you have from this type of detective work is the obscurity Google maintains in their formulae.

As a business, stabilizing the income you receive from your company’s AdSense programs is as simple as adjusting for traffic. While advertisers’ spend may vary, as will the split formula, there is plenty of data with which to predict current trends, and with which to develop your accounting data. The condition you describe (varying income because of unknown split formulas) is not the only advertising factor that produces variable data each cycle … every advertising program that is based on dynamic activity contains just as much “slop” with regard to how predictable the income would be for any future period.

For example, CPM may be set at $5.00, but will this Tuesday’s impressions be identical to last Tuesday’s impressions? Never.

One of the tasks any ad management professional has to deal with is variable income (or spend, in the obverse), regardless of whether you know the exact split formula or not. If you can say “80%-85%” reliably and you have trending data that gives you the average income for any cycle, then you can plan your business around that figure just as easily as you can around a $5.00/CPM figure.

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