Google, in a new move towards transparency has revealed how it shares advertising revenues with publishers who provide content for its AdSense and search services. This announcement has led to a lot of speculation not only of the numbers Google has announced but also why this step has been taken by Google in the first place.
According to Google’s official announcement on the Google AdSense Blog, AdSense’s two most popular products are AdSense for content and AdSense for search. AdSense for content publishers make up the vast majority of our AdSense publishers. 68% of the revenue collected from advertisers for AdSense for content is paid to the publishers while the analogous figure for AdSense for search is 51%. The remaining revenue is utilized for reinvestment into these services. The announcement also highlights the fact that AdSense for content revenue share has not changed since 2003 and AdSense for search revenue share has not changed since 2005.
The revenue share of other AdSense services for mobile applications, feeds and games have not been disclosed as Google says it is not in a position yet to reveal accurate numbers for the same.
There have been many questions raised over these figures. For one, the methodology of arriving at these numbers has not been stated and therefore has come in to question. As one reader pointed out, it was not clear whether these percentages were averages , medians or modes. Moreover, the variation in the revenue share for small and large publishers was also not discussed. Also some analysts have pointed out that there is no mention of the 15% “serving” fee Google takes before splitting revenues with publishers. If this fee is considered then the revenue share reduces to 57.8% for AdSense for content.
The other discussion that this announcement has sparked is why Google has timed this attempt at transparency now? The most common guess is that Google is trying to deflate Apple’s pending iAd network by claiming a modestly higher split — 68% versus 60% of iAd. Other guesses are that this in response to the many anti-trust lawsuits it’s dealing with in Europe. Recently an anti-trust investigation in Italy has required Google to publish the exact revenue share numbers in an Italian newspaper. There is also the opinion that the FTC( Federal Trade Commission ) of the U.S. is revising policies to increase transparency in online advertising. These speculations are in conformation with the fact that Google has also stated that in the near future it will begin showing the revenue shares for AdSense for content and AdSense for search right in the AdSense interface.
One significant conclusion from these numbers is that Google seems to be a much larger player in the online advertising market than it was previously considered to be. Google revenues last year were $23.6 billion, 99 percent of which came from advertising, the company said. If Google’s revenues only represent the 40.5 percent cut that it takes from everything spent on its networks, then the total amount of advertising dollars spent through Google last year was $58.3 billion. Recent estimates by eMarketer and IAB put 2009 online advertising spend at $25 billion and $22.7 billion, respectively. The spend through Google is larger than both these estimates which means that the web advertising industry is much larger than it is thought of.
Any attempt at transparency can only be a welcome news for all in the industry. This gives an opportunity to everyone to better understand the dynamics and nuances of the competition and the industry. It is hoped that this will lead to a competition in achieving new levels of transparency as well by the market leaders.
