Google Now 68% Less Evil

After several years of hearing the same question, Google (Nasdaq: GOOG) has an answer for site publishers and webmasters that rely on Google's ad network to monetize their sites.

The question: How much is Google paying its AdSense partners?

The answer: Google is returning 68% of the revenue collected from advertisers to content partners that allow Google to populate their pages with contextually relevant ads.

That's a generous slice, considering all the work Google does to make sure it's drumming up attractive keyword-based spots that publishers and bloggers would be hard-pressed to market themselves. Google also revealed that it pays out 51% of the related ad revenue to website operators that embed Google search results into their pages.  

Transparency is a good thing, but why did it take Google so long?

By its own admission, the 68% content rate hasn't changed since its launch seven years ago. The search rate has held steady at 51% since an increase in 2005.

The timing may very well have to do with the criticism that Google is receiving for privacy lapses. Perhaps this move is an olive branch to regulators after receiving clearance for the AdMob deal, or a recognition of competitive threats on the way.

Let's delve into that final possibility.

"When considering different monetization options, we encourage you to focus on the total revenue generated from your site, rather than just revenue share, which can be misleading," this morning's explanation points out. "For example, you would receive $68 with AdSense for content for $100 worth of advertising that appeared on your site. If another ad network offers an 80% revenue share, but is only able to collect $50 from ads served on your site, you would earn $40."

Is there an AdSense threat on the horizon? Yahoo! (Nasdaq: YHOO) announced last month that it's shuttering its rival Yahoo! Publisher Network. However, Microsoft (Nasdaq: MSFT) has stepped in to fill the void with its pubCenter offering that's still in beta. In terms of keyword-based searches, there doesn't seem to be a whole lot of competition, and that's probably why Yahoo! referred publishers to the smallish Chitika platform last month.

Google has to know something, though -- because introducing the revenue-yield comparisons appears to be a pre-emptive strike.

Quite frankly, Google's announcement also has me a bit confused. Big G has routinely revealed the percentage of AdSense revenue it pays out, on average, to its partners. Let's go over the company's first-quarter results in each of the three past years.

Source: Google quarterly financial releases.

Now, these aren't the figures that Google considers as traffic-acquisition costs, which include other related costs of running its AdSense program. This is the actual amount that Google claims to be paying out to its partners. This is higher than 68% on all three fronts, and the rapidly declining rate had me making the presumably false assumption that Google was getting greedy by scaling back on its partners in recent years.

I was wrong, but I'm still left scratching my head.

How can the amount in this morning's announcement be a constant 68% for content partners, when we have a larger declining number in its quarterly press releases?

The likely answer is that Google relies on a figure that's larger than 68% to woo dot-com juggernauts. In striking deals with AOL (NYSE: AOL) and News Corp.'s (NYSE: NWS) MySpace several years ago, it's understandable if Google had to pay more than its usual going rate. It wasn't only about landing a ton of page views to slap ads on. Google had to make sure that Yahoo! or Microsoft didn't get that juicy real estate.

Those online behemoths have been mortal lately. AdSense partner sites generated a 24% increase in revenue for Google over the past year, far better than AOL's 19% decline during the same period. As smaller sites making 68% become a larger part of the AdSense revenue mix, Google's payout ratio will continue to move in that direction.

However, Google should still have explained the disparity in putting out the 68% figure, because it doesn't mesh with its financial press releases.

Can anyone seriously take on Google's AdSense juggernaut? Share your thoughts in the comments box below.