Google ad revenue getting even more profitable?

In Paul’s article this morning about another Google anti-trust violation in the EU, he notes Bloomberg reports saying that AdSense is becoming less and less relevant. It’s interesting that AdSense (where Google pays websites to host ads) is continuing to shrink while AdWords or Google Ads (where advertisers pay Google for search and display ads) continues to see big growth (I assume it is since Google’s overall ad revenue is growing).

So that means while Google is collecting more revenue from advertisers they are paying less revenue to sites that actually host ads. Presumably this reflects more and more ad dollars moving into search, and also puts into sharp relief competitors’ criticisms about Google essentially scraping content to serve up information directly to consumers (and bypass sites themselves).

For people deep into online advertising this is probably obvious stuff– and even I understood the relative difference in cost/value of search vs. display ads– but I hadn’t ever bothered to look at this distinction between AdSense and AdWords in the way this article has prompted me to. Of course, I could be misinterpreting the whole thing and perhaps there are other dimensions I’m ignorant of. If so, I’d be interested in hearing what others have to think.

Conversation 4 comments

  • j_c

    18 January, 2019 - 11:45 am

    <p>Last time I looked almost 80% of all Google advertising revenue came directly from their own properties, namely through Adwords or what is now called Google Ads. They also have YouTube, their ad Exchange, their DSP, their ad server and of course Adsense making up that other %.</p><p><br></p><p>The problem for publishers is supply and demand. There are millions of Web sites (and many millions of fake web sites and scams) plus applications delivering enormous amounts of impressions. These impressions in bulk generate large amounts of money BUT in and of themselves have very little value.</p><p><br></p><p>In recent years ad exchanges have been created that all compete with Adsense (including Googles). These exchanges sell impressions that can be linked directly with user data. Less often you buy impression on a Web site directly. Instead advertisers buy audiences. When someone who matches a target audience visits a Web site they are identified. If a site has impressions not already sold directly to an advertiser, the impression is made available on an exchange. Demand Side Platforms (DSP) are programmed to monitor for these available impressions and bid in real-time to show an ad in an auction. The winner of the auctions ad is shown to that person. This happens all in the time it takes for you to load a page.</p><p><br></p><p>You can buy lots of impressions for almost no money this way compared to going direct to a publisher. Advertisers often pay additional for the audience targeting part but those dollars go to data providers, the DSP and not publishers. Again, why revenue is increasing for people like Google but publishers are seeing less of it.</p><p><br></p><p>Meanwhile people rarely click on banner ads (on purpose at least) so not only are they in high supply, they generate little of what people want. Further decreasing value and money to publishers.</p><p><br></p><p>The money is increasingly in video ads which are also sold programmatically in the same was as display ads. The one problem right now is that a large amount of video consumption happens on Netflix which has no ads. YouTube is major but has issues with fraud and content that isn't brand safe.</p>

  • Paul Thurrott

    Premium Member
    18 January, 2019 - 12:53 pm

    <p>At one point, advertising accounted for 97 percent of Google/Alphabet's revenues. Today, it's much lower—someone below says 80 percent, but I don't recall. This isn't because ad revenue has decreased, however. It has grown. It's just that some of Google's other businesses, especially G Suite, are actually starting to contribute.</p>

  • lordbaal1

    18 January, 2019 - 1:15 pm

    <p>Google is not telling companies that you can only use ad words. They have no say over companies that uses a different ad platform. They are not saying they can't use it.</p>

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