The Future of Google Adsense There are many ideas springing up concerning what Adsense - will look like in the future and how the system will change as opposed to what it is now.
Analysis: What's the future for Google's plunging $12.7bn AdSense business?
Google's latest quarterly financial report shows problems in its AdSense network, which was responsible for 29% of last year's $43.7 billion in revenues.
It means a lot less money for Google's network of publishing partners, such as the New York Times. Foremski's Take: $GOOG's Q3 report showed zero growth for AdSense compared with 22% yearly growth for its AdWords network.
Not only has yearly growth come to a stop but AdSense revenues have shrunk every quarter this year (see chart below).
The continuing plunge in AdSense is in sharp contrast to robust 20%
revenue growth in 2012, which outpaced AdWords' growth of 19%. AdWords/AdSense mismatch…
This large gap in the performance of Google's ad networks is
unprecedented. Historically, they have mirrored each other's growth
(below).
In Google's Q3 conference call with analysts, CFO Patrick Pichette said, "advertising policy changes" were to blame for the change in AdSense performance.
With three quarters of sequential decline in revenues the future of
the ad network is uncertain — especially since it shares about 80% of
the revenues with its network but keeps 100% of AdWords revenues.
The AdSense network has large, legitimate publishers but it also has
smaller sites filled with spam, or content stolen from other sites.
Google has been criticized for aiding such content theft by allowing
pirates to profit from their actions through AdSense, and then sending
them traffic through search — effectively making Google an accessory.
The AdSense network has been very important to Google in the past and helped it successfully IPO in 2004 at a time when the stock market was skittish about investing in tech companies with volatile revenues.
AdSense publishers doubled Google's advertising revenues
and stellar growth of 194% — compared with just 88% for AdWords —
helped the IPO tremendously, showing potential investors that business
was strong and very hockey-stick in direction.
AdSense boosted the IPO…
Google's IPO was one of the most successful in history and it sparked a new interest in tech stocks, which led to a boom in startups.
But is AdSense shrinking because of Google's war on spam and pirates? Or, is it reflecting deeper issues with online advertising that could become serious problems with Google's advertising business?
AdWords grew 20% but how much of that is due to "advertising policy
changes" imposed early this year that require customers to buy mobile
ads even if they cannot monetize that channel? It increases costs for
advertisers and their cost of conversions so it could backfire for
Google if some accounts that were not performing that well now get
pushed into closure.
"Mobile is killing media."
There are serious issues with online advertising affecting the entire
industry. Google has reported declining value from clicks on its ads.
And the shift to mobile ads is accelerating the decline, because it
produces a fraction of the revenue of desktop ads.
Matt Sanchez, CEO of San Francisco based ad network Say Media, recently warnedthat, "Mobile Is Killing Media."
Digital publishing is headed off a cliff … There's a five fold gap
between mobile revenue and desktop revenue… What makes that gap even
starker is how quickly it’s happening… On the industry’s current course,
that’s a recipe for disaster.
Google has been pushing to diversify. It used to get 98% of its
revenues from advertising but in Q3 16% came from other sources, such as
enterprise IT, and mobile phone sales.
However, those businesses aren't as profitable as advertising. Its
smartphone business lost a whopping $1.08 billion in 2012, and losses
this year total $645 million.
Search v AdSense...
The decline of AdSense says more about Google's ability to fight spam
with its indexing algorithm than anything else. It should not be
sending traffic to spam and scraper sites in the first place.
The fact that Google can't monetize AdSense is blot aqgainst its
algorithm. It should be able to distinguish legitimate sites from the
sites that scrape them but it often doesn't.
Distracted by moon shots…
The stock market has enthusiastically welcomed Google's Q3 report by
boosting its shares to new highs. Maybe investors were distracted by the
self-driving cars and "moon shots" to pay attention to the long term
negative trends in Google's core.
