Why AdSense Earnings Are Sharply Dropping

WebmasterWorld has another thread about lowering AdSense prices.

When the economy is good and advertisers have robust ad budgets, an ad network might be willing to sell them whatever they are willing to buy. If the advertiser wants to overpay for some ads and associate that spend with branding then so be it. But when the economy slows down, the ad marketplace needs to separate the best ad inventory from the weakest ad inventory to protect the rates of their best ads.

From Google's perspective, search is the golden goose tied directly with conversions. Syndicated ads, which can lead to conversions, may often carry a premium price based on branding value. Here are some of the forces that might be lowering AdSense earnings

  • Some brand advertisers cutting their ad budgets, trimming brand related ads before they cut direct response ads.
  • Those brand ads being replaced by less trustworthy ads from smaller advertisers who bid less and are less likely to get clicked on.
  • Google changing the clickable region of AdSense ad units.
  • Google lowering the estimated value of content clicks to help protect the value of search clicks and shift more of their network spend toward search.

Given Google's market dominance over the contextual ad market there is virtually no floor to how low they can price AdSense ads on non-premium publishing partner websites.

I have one site where the ads are AGGRESSIVELY integrated into the content, where that site gets thousands of search driven visitors per day in a big money vertical. That site has a CPM rate which is roughly equal to what one to two clicks would cost if I had to buy that traffic from Google directly (rather than me arbitraging their organic search results then selling that traffic). Clearly there has to be a better way to monetize that site. The ad prices are so cheap that I would be the buyer if I had a higher value model in that space.

If you have been using AdSense as a business model now is a great time to create new revenue streams and test shifting from an AdSense ad seller to an AdSense ad buyer.

Published: February 4, 2008 by Aaron Wall in contextual advertising


Marios Alexandrou
February 4, 2008 - 4:36pm

My AdSense earnings dropped in a big way last October. Not even a smooth trend like you would expect for something natural. Since that drop things have been steady and while I'm bothered by the decline, the eCPM remains high enough to keep me from switching to another system.

As an ad buyer, I haven't seen any decreases in costs for the content network. I suspect I'm just getting a smaller piece of the pie from Google and advertisers are paying just as much as they have in the past.

February 4, 2008 - 8:23pm

Marios, I think you are right. You can spend a lot of time testing different things to stop from getting "smart priced" or improve your "quality score," but at the end of the day it is probably smoke and mirrors for the most part.

Google has been slowly increasing their take from standard publishers revenues (those that don't have a specific distribution deal)

I haven't seen Q4 2007 numbers yet, but check out this article from motley fool which lays out their revenue share for the rest of 07.'


February 5, 2008 - 12:55am

Google are just taking more from adsense publishers, to maintain their stellar growth. Their share price value is based entirely on rapid growth. Their last profit announcement showed 17% growth - for a normal company, that's very healthy. What happened to Google? People were disappointed and their share value fell. So they're taking more money from Adsense publishers as an act of desperation to keep the profits driving as high as possible. I'd love to know much it is, but I can say that from my small sample of around 10 websites in all kinds of markets I'm getting as many clicks as I was 6 months ago, but about half the money.

I'm also seeing a reduced CTR too - increased ad blindness?

So basically I'm driving more traffic to my sites than I was 6 months ago, getting a lower CTR, and lower earnings per click.

Average Joggler
February 5, 2008 - 7:23am

Maybe it's because I'm still on an upward growth curve (traffic wise) but my Adsense earnings have continued to increase.

February 5, 2008 - 3:59pm

What about your CPM rate?

Kid Croesus
February 19, 2008 - 10:32am

I have a different theory as to why adsense rates are dropping. Coinciding with the change to the clickable part of the ad in November, Google made another change to their policies that I believe has had a drastic effect on adsense revenue.

Google had been offering a program called Site Targeting that allowed advertisers to buy a site on a CPM basis. That program had been generally quite beneficial for publishers, as it would create an artificial CPM floor below which an impression could not fall. In other words, if an advertiser bought your site directly with a $2.00 CPM ad, google would show the $2 CPM ad unless the expected value of the keyword ad exceeded $2, in which case they would show the keyword ad.

Around November 15th, Google changed that policy. Now advertisers could also buy a keyword ad directly on a CPC basis. I believe that has accidentally wreaked havoc on Google's auction system, driving down demand and therefore prices for keywords.

In other word, lets say I am an advertiser looking for the keyword "diabetes". In the old days, to get that keyword, I had to buy the entire google network, including the "made for adsense" sites. Now, I can just buy 50 sites I trust.

What happens is that the revenue for trusted sites remains high, but the overall competition for the word diabetes decreases, and the law of supply and demand drives down the price of the keyword "diabetes".

If enough advertisers shift to a targeted strategy, then eventually the total number of keywords advertised in the marketplace begins to drop, and google's ads become less contextually relevant.

Just a theory -- anyone think there is anything to it?

February 19, 2008 - 11:38am

That is a good point too Kid. Rather than only offering site targeting on a cpm basis they now allow you to buy it on a cpc basis.

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