A few days ago in a post about whether Google was being fair to AdSense publishers, I mentioned how Google's share of AdSense revenue has actually been declining in the past year. In the beginning of 2007, Google gave an average of around 84% of revenue earned through AdSense back to publishers, but in the last 4 reported quarters, it's been 89%.
AdSense revenue also seems to have stalled, while revenue from Google's other web sites continues to grow. In 1Q04 Google kept $63 million from adsense compared to the $303 million they earned from their site. But in 3Q04 they only kept $184 million from AdSense which is tiny compared to the $3.67 billion in ad revenue they generated on their own sites. You can see how much it's fallen in the following chart.
Looking at these numbers, I have to wonder if Google might be thinking AdSense might be more trouble than it's worth?
I'm not sure if this is a coincidence, or the cause or a solution to a problem, but around the same time that total AdSense revenue began to flatline, is also the same time that Google started disabling arbitrage accounts. At least those using the crappy MFA (made for AdSense) landing pages.
Lately, it seems like they have also been disabling more accounts and from the looks of the sites that people are complaining about, it might be that they're working on increasing the quality of the sites they want to participate in the AdSense program. A lot of people have been complaining about being banned from AdSense.
This makes me think that Google is seeing a decrease in conversions for their advertisers and is trying to improve the conversion rate. Earlier this year they stopped the AdSense for Referrals program. That program was based solely on conversions which makes me wonder if Google is having a hard time converting AdSense publisher's traffic.
Let's take a different look at Google's revenue from AdSense. Below is a chart showing how much money Google keeps from running AdSense. The revenue generated minus the traffic acquisition cost, what publishers keep. Values are in thousands so $100k is $100 million.
As you can see, Google has been making less money from AdSense since around the 2Q07 except for the spike in the third quarter of that year. In their quarterly reports they always say that the increases in revenue they are seeing is from an increased volume of clicks and that the earnings per click are lower.
If they're getting more clicks, they're serving more ads and likely adding more and more publishers. There's a lot of overhead involved with all that. All their servers, programmers, employees,etc. You have to wonder if stockholders might be thinking if $180 million a quarter is worth the effort or if they should be focusing on keeping the AdSense revenue to themselves. Especially now that GOOG is trading at about half of what it was a year ago.
I don't think Google will abandon AdSense. They're taking a smaller cut of AdSense revenues and that makes me think they care about their AdSense publishers. They're also working on improving AdSense and increasing the benefit to advertisers. But what if their efforts fail? Things are different now that they have shareholders to worry about.
You probably shouldn't panic, but you might want to take a closer look at your site to make sure you're following AdSense policies and guidelines and that your sites contain good content that adds value. And hope that your site's clicks convert well.