Google Adsense Tutorial, What percentage does Google pay to its Publishers?

Google Adsense Tutorial
What percentage does Google pay to its Publishers?

What percentage of Ad revenue does Google Adsense program pay to its Publishers? This is one of the most troubling and unanswered questions for webmasters. Google does not disclose how much percentage they pay to the publishers and it is perhaps one of the well guardered secrets. Here we try to bring out what we know and what we learned from peers about Googles payting policies and hope to shed light on some of the very interesting areas.

Dispite the secrecy behind this payment percentage issue, Adsense by far exceeds the over all payout performance compared to many other advertising options on most content sites. To keep the publishers (website owners) happy with Adsense is important for Google to keep Adsense as the primary advertisement source for Publishers and to the overall success of the program. So it seems that Google does payout a significant portion of the Ad revenue through Adsense program back to the publishers.

According to Googles SEC filing and an article about Digital Point published in Newyork Times (link here) we have reason to believe that Google pays some where between 70 to 80% of the Ad Revenue to publishers.
Why Google maintains Secrecy ?

The possible reasons for Google's secrecy on payments can be:

It's a program safety policy. I mean, if you think about it, if Google were to openly announce the share, then the competitors can offer higher percentages to Publishers and this could result in pricing wars.
The complexity of the process thay follow to personalise and customize for each case is hard to explain. Besides, its not static and fixed and same for all sites. And they can modify it whenever, however they think is appropriate without having to explain and ground their action.
Knowing who makes what would be a bone of contention for publishers.

Parameters for Calculating AdSense Payout

Basically, what we do know for sure is that Google receives the money from the advertisers any time an impression is registered or a visitor clicks on an AdSense advertisment. Then the revenue is shared with the publishers. It works like this:

the cost of the click is established by the “smart pricing” system — this is the price advertisers pay;
an undisclosed percentage is applied to this amount, that results into the shares for the publisher and for Google™.

Smart Pricing

Lets examine what this Smart Pricing is and how publishers who provide solid and focussed content can make use of it to their advantage:

Bidding: Pricing starts from the supply and demand ratio, settled in advertisers' bidding. (So far, not much we, as publishers, can do, except maybe for making your best keyword pick.) The price thus established is usually the highest possible, for there follow other factors that influence the CPC.
Potential Coversion Rate : The result is then modified according to the click's conversion potential. That is, it is not enough to just click on an ad, its value is given by the analysis of the actions following the click — registration, newsletter sign-up for example — in a word, its likeliness to turn into business results.
Relevence of the Ad: Further, the price of a click is influenced also by content relevance, the type of site on which the ad appears. Keywords and theme that triggered the ad are also analyzed. The more content-relevant the ad, the higher the price for the click.

It is logical that not all publishers be rewarded the same, but taking into account their potential as ROI holders. But we've already seen this as a factor analyzed through the “smart pricing” system.

Now, the shares of payment (between AdSense and publishers) are not calculated all alike, for not all publishers are “equal”; it is known, for example, that big web publishers get to negotiate the rates with Google. Why?

Authoritative, big publishers represent the pledge of high ROI, what makes them “most wanted” by advertisers. Thus, they will represent for Google also an important revenue source. Undoubtedly, they get to be stimulated to participate and stay in the program by means of a preferential treatment. That would lead to the deduction that smaller publishers are granted lesser shares.

Google states this explicitely in their Initial Public Offering Registration Statement (as filed with the Securities and Exchange Commission on April 29, 2004):

"Typically, in situations where we pay a Google Network member more than the revenue we receive from our advertisers in connection with paid clicks on that Google Network member’s web site, we recognize the difference as cost of revenues. Due to intense competition for Google Network members and our limited ability to accurately forecast the number of paid clicks that will result, we expect that we will enter into AdSense agreements from time to time under which we will make payments to the Google Network member exceeding the revenue we recognize from the agreement. Cost of revenues also includes amortization of expenses related to purchased and licensed technologies."

But it is not necessary to be an “authority” publisher, or a very big one to convert well your site into money. Smaller sites can have excellent potential in this regard. In an analysis to determine the sites' “monetization” rate, we may speak of an “extended” smart pricing applied by Google.

There are some criteria which are unofficially but almost certainly taken into account, which we chose to expose here for you to see also our perspective on the way Google AdSense™ pays:

High traffic and impressions — High traffic is not strictly connected to the CPC. Targeted traffic is more valuable as it is likely to convert more. Thus, sites generating quality traffic (resulting in high CTR) will earn more. CTR seems to be taken into account by AdSense™ when choosing the sites for directing higher paying ads.
Site size and age.
High Page Rank (with all the parameters it involves — valuable content, relevancy of the inbound links, keyword relevancy).

After all, sites that would meet all of the above criteria are very likely to produce more, the higher their potential to raise a profit, the bigger Google's interest to keep them into AdSense.