Monday, February 12, 2007

The Genius That is Google

Google is profiting immensely from the Long Tail of AdSense Publishers....

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There are many AdSense Publishers that are able to derive significant ad revenue due to the huge volume of traffic on their sites. However, there are many more AdSense Publishers who do NOT derive significant ad revenue because their sites have not reached a certain level of traffic volume. If you can imagine the traffic volume as the Y-Axis, and the AdSense publishers (at each traffic volume level) as the X-Axis, you have what I call the Long Tail of AdSense Publishers:

So, you would have, or TraderMike's blog near the left side of the graph, and mom 'n pop blogs near the right side of the graph. Now what's interesting is the delineating mark between the red and yellow areas of the graph. My theory is that this mark represents the threshold volume that publishers must attain before they get paid by Google. In the past, this threshold was $25, meaning, that AdSense publishers must accumulate $25 worth of traffic (via CPC, CPM, etc.) before they could get paid. However, Google has now moved that threshold more to the left, in the sense that publishers now must accumulate $100 worth of traffic before they get paid. This really screws the smalltime mom 'n Pop blogs, but is really great for Google. Why?
Well, the theory of the Long Tail applied in my context of the AdSense Publishers says that the collective sum of all traffic from all of the small time mom 'n pop blogs cumulatively outweigh the big, thick, high volume sites. It makes sense, because the number of highly profitable blogs is measured in the hundreds, while the number of small time, mom 'n pop blogs are measured in the thousands, if not millions. So, Google collects interest every day on the $99 that the mom 'n pop blogs are unable to access because they are below the threshold level as set by Google.
This interest collected is like a fee, similar to the auction fees that eBay charges. eBay recently increased their auction fees, and their revenues increased as a result. Google recently moved the threshold level from $25 to $100, how much additional interest fees will they collect as a result ?? Answer that question, and you will begin to see genius in the triumvirate (Page, Brin, Schmidt) that runs Google.

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