I made more in August 2003 than I did in August 2012!

Someone posted the above statement in the August 2012 AdSense Earnings Observations [webmasterworld.com] thread. There is a lot going on in that statement. The question to think about is, what got us to the point where some are making less today than they were nine years ago? It's intellectually lazy to scoff that web publishers are making less in 2012 than in 2003 because of the economy. This is how we miss the truth, by scoffing at the obvious without looking at what's happening deep down. Number one, there are billions more ad dollars being spent in 2012 than there were in 2003. On page 7 of this report of online ad spending compiled by the Internet Advertising Bureau [iab.net](IAB), their measurements of online spending in the U.S. show that in 2003 there was just $7.27 billion spent on Internet advertising. By 2010 that figure had risen by almost 400% to $26 billion dollars. By other measures, global 2011 advertising spending grew by almost 17% over 2010. IAC had a great second quarter, whose earnings rose by 40% [hollywoodreporter.com]. Google had a great 2nd quarter, too. Google's paid clicks increased by 42% [zdnet.com]. How does that compare to your paid clicks? It's not the economy. Clearly the world has changed, but not in the way you might suppose. The world has changed to the extent that more money is being spent on online advertising today than at any other time. So what is going on?

A major problem with the AdSense program is that it is poorly promoted. Now ask yourself, how does Google benefit from an AdSense program that underperforms? Let's count the ways:

1. AdSense doesn't siphon off ad dollars from the AdWords program
Google makes more money from the AdWords program. Make no mistake, the AdSense program competes for limited advertising money with the AdWords program. A weak AdSense program keeps more money in Google's pocket.

2. AdSense is good for Google because it's bad for affiliate programs
Think about it. Why would Google create a competitor against affiliate programs but not promote it to it's advertising clients? Because the AdSense program increases advertising inventory at the expense of affiliate companies. Affiliate programs were competitors for advertising dollars that Google would rather see flow to them. But competitors compete with advertising inventory. AdSense gave Google a way to lock up advertising inventory and keep it from their competitors. By not promoting their AdSense program, whether they planned it or not, Google created a way to keep advertising inventory from their competitors while simultaneously not allowing it to compete with their more profitable AdWords inventory. That's a win-win for Google AdWords but a lose-lose for web publishers, affiliate companies, and ecommerce sites that would otherwise be advertising on pay for performance affiliate networks.

3. AdSense is good for Google because it is bad for competing search engines
For awhile the AdSense program blatantly allowed spam sites to participate in their program. Why? How did it benefit Google to host thousands of copyright infringers and article spinners in the AdSense program? One benefit is that it was bad for Yahoo and Bing. AdSense Spam flooded the index of Bing and Yahoo. There is no smoking gun where someone at Google admitted as much. But the reality is that for a time AdSense was a defacto weapon against the other search engines, a weapon that degraded the search indexes of Google's competitors.

4. Data, data, data... and more data
Mediabot, for "bandwidth saving purposes" shares data with the search index. I am not saying that Google shares AdSense information with the search department, particularly which sites are connected. But the associated data is very rich for identifying spam networks, linking patterns, etc.

When someone posts that they are earning less in 2012 than in 2003, it's easy to dismiss it that the world has changed. It's too easy. But then again it's always more difficult to take a moment to think things through, so one can't be faulted for dismissing such a statement. But if you do dismiss that statement then you'll miss out on what's really going on behind the scenes.

[edited by: martinibuster at 2:57 am (utc) on Sep 13, 2012]