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Google AdSense pays out over $1bn in revenue every quarter of the year to publishers. For many of these publishers, especially smaller ones, AdSense is a primary source of revenue.

Yet there's something interesting about AdSense: publishers don't know the exact percentage they're being paid by Google for ad revenue their sites generate.

One possible reason for this: if Google disclosed the percentage it pays publishers, competitors might look to beat that percentage, making it harder (and costlier) for Google to retain its most important publishers.

But there are indirect ways to estimate what Google is paying publishers. As a publicly-traded company, Google breaks out 'Google Network Revenues', which represents the amount of revenue generated by AdSense, as well as 'Traffic Acquisition Costs' (TAC), which represents -- for the most part -- the amount it pays to AdSense publishers.

Amit Agarwal has used these numbers in the past as a proxy for how much Google is paying to publishers in the aggregate and yesterday he posted about the decline in the relationship between TAC and Google Network Revenues.

In the first quarter of 2009, Google reported $1.64bn in Google Network Revenues and $1.23bn in TAC. That means 75.0% of the revenue generated went back out to partners. By the fourth quarter of 2009, that percentage had dropped to 72.1%. Had Google maintained the 75% level in Q4, it would have paid out $60m more to publishers.

Naturally, I'm sure there's a debate to be had about whether or not Agarwal's methodology for assessing the AdSense publisher payout is really meaningful, and I'm sure there are some who would point out that $60m is a rounding error to Google.

But I do think Agarwal's post is a good reminder: AdSense was launched in 2003 and more than half a decade later, publishers still don't have any concrete knowledge about the revenue share they're receiving. When you think about it, that's quite astonishing if only for the fact that Google has been able to maintain such an arrangement so successfully for so long when the web has in so many areas worked to favor transparency and competition.

There can be no doubt that Google's position gives it a lot of flexibility as a company. Much of its success in delivering solid earnings despite the economic downturn has been related to cost-cutting. In theory, it appears Google can dial up or dial down the amount it pays to publishers to squeeze greater profitability out of AdSense at any time at its choosing. I'm not saying it has done that, but I don't see any reason it can't.

The question I have is how long Google will be able to maintain its opaque relationship with publishers. While it's hard to imagine AdSense being dethroned anytime soon, one has to think that Google's AdSense secrecy could be as much a disadvantage to it someday as it is an advantage today.

Photo credit: Yodel Anecdotal via Flickr.

Patricio Robles

Published 26 January, 2010 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2378 more posts from this author

Comments (6)

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publishers

I dont think google will cutting publishers' AdSense revshare?

over 6 years ago

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Bobjuck

When I update the percentage of the revenues a member can have in the administration section of my pligg site, the customer Adsense ID disappears and the user have to enter it again. ????

over 6 years ago

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veiko herne

I think there is something wrong with this calculation as my calculations are showing Google's commision to be 80%. From 5 cents minimum to advetiser, the publisher ge's only 1 cent.

over 6 years ago

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Rob

Check out this excellent article: Even just because the percentage payout to the parking companies can’t change during the contract period doesn’t mean the actual amount paid out can’t change. http://domainnamewire.com/2009/01/15/the-google-squeeze-how-googles-black-box-affects-partners-revenue/ Google screws everyone here!

over 6 years ago

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Tim

There is no doubt the have been cutting revenues.   The TAC shows that plainly in the quarterly report.  That is a fact. 

Just ask anyone who runs multiple sites using Adsense.  Everyone I am speaking to agrees it is down overall.

I've started building sites using Chitika ads and have done pretty darn well in comarison to Adsense.  I did it as a hedge in my business b/c Google can yank my account at any second and they have been doing this to many people.  I don't want anyone having that kind of control over my business.  I plan to keep moving away and keep a small amount of sites using Adsense so as to diversify from any adverse moves by any one company.  Plus, I just don't trust Google.  I don't think they think of publishers as partners.....I just know too many insiders who have shown my otherwise.

over 6 years ago

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ed

The search engine is the one handling all the tracking and payments, providing an easy way for webmasters to display content-sensitive and targeted ads without having the hassle to solicit advertisers, collect funds, monitor the clicks and statistics which could be a time-consuming task in itself. It seems that there is never a shortage of advertisers in the program from which the search engine pulls the Adsense ads. Also webmasters are less concerned by the lack of information search engines are providing and are more focused in making cash from these search engines.

over 6 years ago

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