Umair Haque / Bubblegeneration

Monday, January 16, 2006

The Problems With AdSense, pt 1

This nice article in the NYT talks about how AdSense is reshaping the media value chain - by redistributing revenues to peers; something we talked about quite a while ago (I think we even referenced the site the NYT talks about)

The article misses the big problem with AdSense (and it's competitors) at the moment.

Though Google's default revenue share is generous (by Media 1.0 standards) the relevance of PPC ads increases exponentially in traffic. This should be intuitive; the probability of you being interested enough to click is far greater at 1000 visitors than at 10.

So value creation and value capture by micromedia aren't aligned on AdSense. Economically, AdSense is
still inefficient.

Now, I can't connect all the dots for you, because one of Google's Big Competitors has taken to scanning my blog like the NSA on al-qaeda (guys, talk to me instead of stalking me)...but I will say that this is a huge weak spot for Google.

-- umair // 8:44 PM // 4 comments

Comments:

would value creation and value capture be more aligned -- and hence would adsense be more efficient -- if, say, percentage payout to publisher increased as the network grew?

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kid mercury // 9:28 PM

I don't understand your comment about "you being interested enough to click at 1,000 visitors..." could you please clarify that sentence? Thank you

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Joseph Weisenthal // 9:38 PM

KM,

You have it backwards.

JW,

Central limit theorem.

Thx for comments.

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umair // 2:26 AM

Are you arguing that there is a problem with AdSense from the perspective of the blog publisher, the advertiser, or Google's business model?

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Alex in Los Angeles // 6:02 PM