Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

What Future For Google's Publisher Network AdSense?

Posted by Tom Foremski - May 7, 2007

In my recent articles about Google's publisher network, AdSense, I said that there is a conflict of interest at work. I'm not saying there is any wrong doing, it might be better to say that Google is "conflicted" because of the greater profitability of advertising through its own sites, through its AdWords network.

Since 2004 Google has increased the percentage of total revenues coming from its AdWords network by 24 per cent. 

In the most recent quarter AdWords grew 76% from a year ago, but AdSense grew just 45%.

It makes sense to grow revenues through AdWords because Google keeps 100% of the revenues.  Google keeps about 20% of its AdSense revenue.

Since GOOG has a fiduciary duty to its shareholders to maximize profitability, it is conflicted in where best to invest its resources. Should it invest in boosting revenues through AdWords or AdSense?

The answer will always be: invest in boosting AdWords revenues.

And as its own sites get more efficient at advertising, its Google's partners will see less revenues coming their way. Google is competing with them for advertising dollars and getting better and better at it--as its financial results clearly show.

This opens up a market opportunity for independent advertising networks that do not own properties that compete with those of their customers.

And it is a huge market opportunity: Google's AdSense partner network generated revenues of $1.35bn in just the first three months of 2007.

The original article is here:

Is This GOOG's Mammoth Conflict Of Interest?

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