Since its very inception, Google has relied on delivering the most relevant, highest quality search results to its users with its simplest of web-pages - a page with a Search box on it. By providing a better mouse-trap, Google quickly began gaining mind-share and eventually users from its competitors like Yahoo!, GoTo.com, MSN.com and so forth.

Then around June 2003, Google introduced a completely innovative way for website owners around the world to make money from the traffic that was visiting their site - Google AdSense.

Why Call It Innovative?
Wider Variety of Advertising
Where does Adsense stand today?
Future of Adsense
Alternatives to Adsense
Resources

While advertising on websites is almost as old as websites themselves, most site owners had to negotiate individual deals with advertisers, and this can be a cumbersome process. To solve this problem, several advertisement brokers came into the picture - BurstMedia, FastClick, ValuClick and more - who helped website publishers and advertisers meet on a common platform and avoid individual negotiations. These brokers were good (and still are) - however, they were looking to serve publishers with a higher than average traffic and page views in order to provide top quality service to their advertisers.

This was understandable as the main attraction of an advertisement broker is to deliver high quality traffic to their advertisers. For Google though, search results was their reason to live and breathe - and was also the reason that visitors came to their site.

That is, folks came to Google to look for information.

It was thus a logical extension for Google to deliver relevant advertising results on their Search Results pages, and charge advertisers money for every click that was made on their links displayed in the relevant result pages.

This search for relevance, that Google has mastered, thus allowed them to offer their technology in simple to use code form to all types of websites. This reduced:

• The time it took for a publisher to display advertisements
• The degree of qualification that a publisher must possess to display Google AdSense advertising

By thus reducing the barrier to entry for web-publishers, Google AdSense has opened the web-publishing industry far more than before - allowing even more quality information to find its way to the Web.

The Internet was likely to lose its novelty, and information content would have suffered to a degree - but by making it easier to monetize traffic, Google AdSense has permitted and encouraged more good information to find its way to the web. Yes, several poor quality sites have also emerged hoping to capitalize on this technology - resulting in a saturation of important keywords - but over time, and with improving Google Search technology, high quality sites - especially those with return traffic, will win out in the world of Google AdSense.

Wider Variety of Advertising with Less Negotiation

Publishers who attract plenty of traffic and who can actually go to some of the other advertising brokers often continue to choose Google AdSense owing to its simplicity, reliability, trusted brand and quite often simply because they earn more from AdSense than any other source! They are quoted as indicating:

1. A wide variety of advertisements that show up on their sites as a reason for their higher revenues
2. And the simplicity of negotiation with Google (i.e. - zero) that allows them to completely focus on the content of their sites. Building more information, allowing more visitors to come more often - with a direct benefit to their bottom line.

And of course, all the advertising remains very relevant to the content they are next to, increasing the likelihood of a click.

So where does AdSense stand today?

Google AdSense, without question, remains the top-dog in the web-publishing industry to monetize visitor traffic to your website. Search is huge for Google and advertising revenues remain the key driver for their earnings. For at least the next few years, this is not likely to change. Even if Google diversifies their income to other streams, search results and income from advertising will likely remain important components of their earnings stream.

At present, Google is busily improving and expanding their range of AdSense offerings, now allowing advertisements with images, link units, and theme-based advertisements (on top of the already existing forms of text advertising). Further innovations will be coming forth over the next year or two from Google as they seek to further enhance user experience and lets them find the information they need. Additionally, as time progresses, Google will continue to distinguish and separate out its major publishers from minor publishers. This has begun already as some of the major publishers can get access to server based delivery of Google Ads, avoiding the ad blockers used at certain workplaces. This distinction will likely deepen.

At some point, distinctions may also be made based on the quality of traffic being sent through by each publisher and the publisher will be rewarded with perhaps a higher percentage of cost-per-click being shared with that publisher.

Google payout percentage to publishers is not officially stated, but estimates have ranged from 70-80%. This is a substantial sharing percentage, and indicates Google's commitment to giving maximum exposure to its advertisers. The forum post here: http://www.webmasterworld.com/forum89/2419.htm presents some data on percentage payout over the last few years.

An excellent presentation on Google AdSense from an advertiser's perspective may be found in this write up at marketingexperiments.com: http://marketingexperiments.com/see/1032

Future of AdSense

As mentioned in the previous section, the immediate future of Google AdSense is secure with continued innovation likely to result in improvement in the types of advertising formats, improvements in the management of the program and increased relevancy.

A few issues loom on the horizon though:
1. Click Fraud: Though Google has been downplaying this threat, it is true that click fraud exists and it is difficult to track. In some cases Google is actually able to take action and ask websites to remove their AdSense code (occasionally incorrectly if forum postings are to be believed). But in many other cases, this issue is well and alive. It threatens not just AdSense advertising, but all of Google Adwords pay-per-click advertising.

   It is possible that the future of pay-per-click is really in the fields of cost-per-lead or cost-per-sale as opposed to pay-per-click. These have the advantages of automatically qualifying traffic from a publisher and rewarding those who send the best kind of traffic. This of course means that the advertiser needs to have a web-site that can record acquisitions (as opposed to a simple information website), and the publisher must send highly qualified traffic if he hopes to earn a decent income.

2. Ad Blocking: This is as yet only a minor issue with some workplace filters blocking Google ads on web-browsers. Google is already known to offer major publishers with code that is served from the web-server of the publisher and thus cannot be blocked by these filters. It is too early to say if this trend will rise.
3. Other Search Engines such as Yahoo! & MSN are planning an entrance into this market. This article http://www.tcsdaily.com/article.aspx?id=031405E details the potential start of competition to Google AdSense.
4. Advertising brokers such as Burst Media have a strong reputation for delivering good advertisements and payments to important publishers (at least 5000 page views/month - you can see their eligibility requirements here: http://www.burstmedia.com/publisher/index.asp?page=eligibility ).

Others such as DoubleClick offer infrastructure for delivering and managing advertisements for large publishers.

In other words, just when you hit the stage in your website evolution where you might be earning a lot of money through AdSense - you will have options available to you through these alternate means that can help you take your advertising revenue to a new level.

Of course making one-on-one arrangements in this fashion may involve more work and fine-tuning to truly benefit you - as opposed to the simplicity of AdSense - but it could be worth it. Thus, the competition for the larger publishers remains intense.

5. Low barrier to entry has led to a proliferation of poor quality websites that rely on AdSense for their income. Occasionally, advertisers have been upset at seeing their ads showing up on controversial websites. Google has been policing this issue as well.
6. Cost per Thousand Impressions (CPM) is a popular advertising technique on the Internet, and Google has paid attention and entered into this lucrative market as well with site targeted advertisements. The CPM model will continue to provide viable competition to Google AdSense.

Alternatives to AdSense

There are several alternatives to adsense, some of which were mentioned in the previous section - however, Google AdSense remains the most generic technique available to most small web-publishers. It is useful however to run through some of the more common alternatives available:

1. Yahoo! Publisher Network and in future, possibly an MSN equivalent: Yahoo! and MSN remain the main competitors to Google in the Search Engine market, pay-per-click market and in attracting a large number of devoted users. Yahoo!'s advent into this market offers a substantial alternative to small-time publishers - and though the offering is not as sophisticated as AdSense, it is likely to improve quickly. This is good news for the small-time web-publisher.
2. Offerings from Chitika, BurstMedia, FastClick, Kanoodle, ClickSor, SearchFeed all offer potential alternative sources of advertisements for your website if you meet the eligibility criteria and offer the right type of niche for the advertisements served.

   A second tier of offerings from AdBrite, BidClix, AllFeeds, Adhearus also exist though they do not seem to have the same level of market recognition as the first tier of brokers.

3. Banner advertisements, page sponsorships, e-zine advertisement placements, lead-generation offering, all offer additional means of monetizing your web-traffic or e-mail list.
4. Affiliate programs remain a huge competition to AdSense - though they are often used as a complement by most websites.

AdSense has a fundamental problem- if your website provides detailed in-depth information- there is often less reason for the visitor to click on an advertisement to get more information. Sites that do offer detailed information are likely to do better as an affiliate for a group of products. In-depth sites are effectively acting as an affiliate for the products being advertised by AdSense. But real affiliateships offer better pay-off than AdSense.

This issue will have to be dealt with by AdSense and others in the market - in effect paying more to publishers who provide highly-qualified traffic (as happens in an affiliate relationship) - than to those who provide less information and thus almost force the visitor to look for more information through advertisements.

5. There are others who offer the same pay-per-click programs as AdSense - such as at AffiliateSensor, PPCProfitMachine, AffiliatePowerAds, - and the reports from publishers has been mixed about them.

The alternatives that are competing in the same space as AdSense either do not have the same credibility as Google, or suffer from a lack of ad inventory, or are simply not as sophisticated yet. However, the competition from adjacent domains such as affiliateships, e-zine advertising, banner advertising and so forth remains strong.

Part II of our report will focus on how to succeed with Google AdSense with focus on implementation details, obstacles to success and how websites are overcoming them, and success examples.

Resources

1. Google's own website remains one of the best sources to learn about AdSense.
2. Webmasterworld has the best forum for adsense. Excellent information and real experiences are discussed every day.
3. Digitalpoint has another great forum for adsense.
4. A fine block diagram on how Google AdSense works!
5. AdSense Books at Amazon.com

We hope you enjoyed this part of the Report. Please send us feedback at shri_ajay@characterandwealth.com on what you liked or disliked about this report.