In brief: find another basket for your eggs
Recently, many web-publishers reported drastic drops in their Google AdSense earnings and offered up many theories as to why that occurred. The problem was reported in web forums, on popular SEO blogs, and in the comments section of the last WebProNews article on the subject. After all that, we've narrowed it down to 8 possible explanations.
In other words, we're closer, but not there yet. It could be innocent, accidental, natural, or orchestrated, but the majority of you seem to be reporting steep (and for some of you, I mean steep) drops in AdSense earnings. The Search Engine Roundtable poll mentioned last time grew to 135 respondents, and the percentages stayed the same: 55% are reporting decreases in earnings.
It could also be that angry people speak the loudest, but many seem pretty sane in their reporting, saying earnings are declining despite level page views and click-through rates.
But we're going to err on the side of the smaller guy, assume you're getting screwed by the big guy, and propose the most possible and/or likely reasons for that. Included with this assumption is that all of you are on the up-and-up with great content, great SEO, great business savvy, and have done everything right but still find yourselves victims of the corporate machine.
See how nice that is? Here goes.
It's the economy, stupid.
This explanation wins the Occam's Razor Award—i.e., the simplest explanation is the correct one. As the economy enters a slow-down period, many advertisers are trimming their budgets, decreasing how much they spend on branding-related advertising and redirecting those funds to more direct response ads, which would include AdWords.
One commentator noted the golden rule of the economy: It will fluctuate. This could be what's happening, and that fluctuation could be swelling on the political side of the content fence as Presidential primaries take center stage on the Information Highway.
Advice: Look into AdWords and improve organic SEO. Otherwise, wait it out like the rest of the economy.
Google got stingy with the AdSense real estate
During an increased focus on conversions rather than clicks and intensified efforts to combat click fraud, Google made AdSense ads more difficult to click. A few have reported that since "the clickable area" of ads was decreased, CTRs have also decreased. At the end of the day, the AdSense drop many publishers are experiencing is a direct result of Google's offensive against accidental clicks.
Google is another good company gone public
This is a more cynical, greed-driven, conspiracy explanation that may resonate with more distrustful element of the audience. You know how everything seems designed to make you pay more at the gas pump? Reports come out that $3.71 per gallon is the tipping point where Americans will drive less, oil is at record prices as companies collude on what to charge on a street-by-street level, and Exxon cites less supply while setting yet another quarterly profit record by pulling in $1,300 per second, and the oil profiteers in the White House hadn't seen any type of crisis on the horizon for the past 30 years.
Phew. Try to say all that in one breath. But the theory goes like that. Shareholders like profit.
So, between the third quarter 2007 and when the fourth quarter report came out last week, Google's stock plummeted from $747 to just a little over $500. No doubt they saw this coming well in advance of their earnings report and looked for ways of tightening things up earnings-wise. It's especially troubling for Google because not only do they control two-thirds of the search market and 75% of the search ad spend, they report consistent growth that would impress anybody, that would be calls for champagne for any company, except the analysts who expect more of them.
If so, it should make you feel better that they missed estimates anyway.
But as a part of that plan to maximize earnings, Google found a way to decrease what they paid out to publishers while increasing what they took in from advertisers. This would also help offset Google's recent moves against made-for-AdSense sites developed expressly for domain tasting, an action that costs Google a reported $3 million.
Admittedly though, when you're dealing in billions, a few million isn't much – unless you're trying to make estimates. But Google also reported a 30% increase in AdSense clicks over the fourth quarter 2006, and a 9% increase since the third quarter 2007. So over all, clicks are up.
Even though clicks are up, and revenues seem down for publishers, Google still reported a 34% increase in AdSense revenues over the same period last year and a 12% increase quarter-over-quarter. This is interesting because Google's traffic acquisition cost—the portion of revenue shared with Google AdSense partners—went up only 1%.
The short version: Clicks are up, revenues are up, amount shared with publishers is level.
Search clicks are better
One proposal says that Google is lowering the estimated value of content clicks in order to protect the value of search clicks, as advertisers shift from network ads to search ads in a slower economy.
You're being better-dealed
Not much explanation needed on this one. Google's making more money from big-name advertisers and big-name websites. Smart-pricing is hitting you hardest because you can't compete with international brands and websites with millions of page views. It also serves as a decent explanation for why Google is sharing the same amount of money with publishers while increasing clicks and revenues.
No fixed advertising contract means no fixed advertising pay-out
One theory is that Google is making deals with others (bigger, higher-budgeted companies) for fixed compensation while slowly increasing their take among AdSense publishers, who have little-to-no control over CPC, or even context. If you don't have a very specific deal with Google, they can pretty much do what they want.
Ad blindness and Firefox adoption is hurting you
This is an interesting theory because it is simple and plausible. People are ignoring ads at a higher rate, and this has been evidenced by eye-tracking studies, especially when the ads appear in the places they expect them to appear. But also there are ad-blocking programs available via the Firefox browser (and other browsers) that block ads altogether.
It may be that your visitors just can't see your ads, either by choice or by software.
Google needs a real competitor
Not only does Google run two-thirds of search, but also controls 75% of the search advertising spend. Yahoo gives them a run for their money in display ads, but nobody is even close to knocking the king off the hill.
If you were in that position, what would you do? Would you make it easier for publishers to make money while you made less? When there's no alternative, you can pretty much do what you want.
What we're left with
We're left with what we're always left with: the same as when webmasters lose ranking in the SERPs. If there's a sudden drop in search ranking, businesses are on the line, most often because the business is relying too much on Google. We could theorize all day, but if your entire business model is based on what Google can do for you, then your entire business model has a good chance of being sunk.
All your eggs + one basket = fail.