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It is possible to think about this the opposite way. Google is showing more ads than it used to. There are more search queries than ever and more partner sites

by guyzero 12y ago

It is possible to think about this the opposite way. Google is showing more ads than it used to. There are more search queries than ever and more partner sites and partner ad impressions. There's a marginal return on these extra impressions, they generate relatively fewer clicks. So you end up diluting the metrics. It's not just more ads per page (although it is that in some cases) it's more page views too. tl;dr: it's dilution due to marginal gains with the added traffic

ChuckMcM 12y ago
That is exactly how I look at it. If they showed no more ads, and got no more searches than the previous quarter, the drop in CPC would be a drop in revenue. But since the increase both ads shown, and buy more traffic, their overall revenue goes up. The question then is when can they not show any more ads (the page is totally ads) and when can they buy no more traffic (everything additional they try to buy is the really crappy robot stuff that comes from some randome armpit of the Interwebs). Then the equation flips, their CPC drops, their searches increase (and costs increase), and they get no more paid clicks than they did the previous quarter. At that point adding money just causes them to reduce profits and they have to start riding the CPC loss down. Given the increase in paid distribution this quarter over last quarter and a loss of 1% in paid clicks, I'm interested to see what next quarter looks like. If they follow their trends they should pay about 917 to 988M$ for distribution traffic. They will need to get at least a 25% increase in paid clicks over Q2 of last year which would be something like an increase in 5 - 6% in paid clicks over this just finished quarter. If they can't do that then they are going to miss their targets again next quarter. My guess (well what I would do if I were in their shoes) is that they would take it out of the members cut, basically reduce the payout to AdSense for Content and other member sites. Either way, interesting times ahead.
- guyzero 12y ago
  Well at some point they're limited to the rate of organic growth of the internet. If Google gets $X per internet user then they're going to only grow as fast as the internet grows.
  - ChuckMcM 12y ago
    I believe they hit that limit several years ago, hence the 100% annual growth rate in what they are paying to buy distribution traffic. My thesis is that they are now in the $X per organic user + $Y = ($Q - $D), where $Y is the amount of money a nominal 'purchased' user brings in ($Q) minus the cost of getting them ($D).

by guyzero 12y ago

ChuckMcM 12y ago

That is exactly how I look at it. If they showed no more ads, and got no more searches than the previous quarter, the drop in CPC would be a drop in revenue. But since the increase both ads shown, and buy more traffic, their overall revenue goes up. The question then is when can they not show any more ads (the page is totally ads) and when can they buy no more traffic (everything additional they try to buy is the really crappy robot stuff that comes from some randome armpit of the Interwebs). Then the equation flips, their CPC drops, their searches increase (and costs increase), and they get no more paid clicks than they did the previous quarter. At that point adding money just causes them to reduce profits and they have to start riding the CPC loss down. Given the increase in paid distribution this quarter over last quarter and a loss of 1% in paid clicks, I'm interested to see what next quarter looks like. If they follow their trends they should pay about 917 to 988M$ for distribution traffic. They will need to get at least a 25% increase in paid clicks over Q2 of last year which would be something like an increase in 5 - 6% in paid clicks over this just finished quarter. If they can't do that then they are going to miss their targets again next quarter. My guess (well what I would do if I were in their shoes) is that they would take it out of the members cut, basically reduce the payout to AdSense for Content and other member sites. Either way, interesting times ahead.

guyzero 12y ago
Well at some point they're limited to the rate of organic growth of the internet. If Google gets $X per internet user then they're going to only grow as fast as the internet grows.
- ChuckMcM 12y ago
  I believe they hit that limit several years ago, hence the 100% annual growth rate in what they are paying to buy distribution traffic. My thesis is that they are now in the $X per organic user + $Y = ($Q - $D), where $Y is the amount of money a nominal 'purchased' user brings in ($Q) minus the cost of getting them ($D).