Web 2.0 monetization by Google AdSense, Where is the business model?

by Donna Bogatin

Google touts its AdSense to Web site publishers as a way to “earn more revenue from your website, while providing visitors with a more rewarding online experience”:

When you display Google ads on your website, you'll be maximizing your revenue potential. Google places relevant CPC (cost-per-click) and CPM (cost per thousand impressions) ads into the same auction and lets them compete against one another. The auction takes place instantaneously and when it's over AdSense will automatically display the text or image ad(s) that will generate the maximum revenue for a page — and the maximum revenue for you.

What does Google specifically mean by “the maximum revenue for you?” Goggle says: “we don’t disclose the exact revenue share”:

The Google ads you are able to display on your content pages can be either CPC or CPM ads, while AdSense for search results pages show exclusively CPC ads. This means that advertisers pay either when users click on ads, or when the advertiser's ad is shown on your site. You'll receive a portion of the amount paid for either activity on your website. Although we don't disclose the exact revenue share, our goal is to enable publishers to make as much or more than they could with other advertising networks.
The best way to find out how much you'll earn is to sign up and start showing ads on your web pages.

According to Google, Google AdSense publishers gain much more than a revenue share. Google’s pitch to prospective publisher partners is:

Enhance your site…Keep your users coming back with contextually targeted ads…automatically delivers text and image ads that are precisely targeted to your site and your site content—ads so well-matched, in fact, that your readers will actually find them useful….Because the ads are related to what your visitors are looking for on your site — or matched to the characteristics and interests of the visitors your content attracts…enhance your content pages.”

A Google AdSense publisher “case study” is presented as:

Goal: Engender user loyalty by providing a quality site experience with contextual advertising
Business name: hireCentral
Business type: Career resources for medical, biotech and pharmaceutical professionals
A nationwide "talent hub" for professionals including nurses, pharmacists, and biotech workers, and medical assistants, hireCentral was averse to untargeted advertising to build revenue. But running AdSense contextual ads fostered a better user experience – and greater loyalty to the site.

Google’s pitch is working: “Ads by Goooooogle” are almost ubiquitous online and Google has succeeded in making AdSense the go-to monetization strategy for Web 2.0 properties of all sizes and styles, in lieu of solid business models.

In the fast-track Web 2.0 start-up world, “business model” does not appear to factor into “stealth mode” or “public beta” or “soft launch” strategies. Many Web 2.0 start-ups that make Web applications and services available to the public for free, first stake their claim to a piece of the Social Web real estate, and then, sometimes as an afterthought, look to Google to “show them the money” through AdSense.

Today’s start-ups’ reliance on “monetization by Google” differs from business model focused strategies of the first wave of the commercial Internet. While the 1990’s Internet “bubble,” is known for the free flowing VC money that bankrolled flimsy “back of the napkin” business models, at last the need to specify a business model was recognized.

Monetization by Google AdSense may provide cash inflows, but it does not represent a business model. According to Investor Dictionary, a business model is:

the mechanism by which a business intends to generate revenue and profits. It is a summary of how a company plans to serve its customers. It involves both strategy and implementation. It is the totality of:

• How it will select its customers
• How it defines and differentiates its product offerings
• How it creates utility for its customers
• How it acquires and keeps customers
• How it goes to the market (promotion strategy and distribution strategy)
• How it defines the tasks to be performed
• How it configures its resources
• How it captures profit

While advertising-supported content delivery represents an established media business model, Google’s plug-in “Just copy and paste a block of HTML and targeted ads start showing up on your website” formula is an ephemeral monetary crutch.

Google lures Website publishers with its “Google grasps the meaning of your content”:

AdSense can deliver relevant ads because Google understands the meaning of a web page. We've refined our technology, and it keeps getting smarter all the time. For example, words can have several different meanings, depending on context. Google technology grasps these distinctions, so you get more targeted ads.

Rather than rely on Google’s algorithms to grasp the meaning of Web publishers' content, and receive an undisclosed share of revenue from Google for the ads it serves against that content, Web properties undoubtedly would be better served, for the long-term, by directly controlling advertiser access to their own content and not sharing their advertising revenues with third-parties.

The classic advertising supported media business model compels a Web property to define a targeted audience, develop and publish content, or enable services, to attract users within the targeted demographic, aggregate the targeted users and then directly sell advertising to marketers seeking to place their message in front of the targeted audience.