Why Google Might Have Changed AdSense Referral Terms

Lots of talk today about Google changing the terms of their referral units for Google Adsense. Good coverage by both

Lets take a little look at why they might have done this.

Google Is A Business

It is actually quite a large business, and each division within a division is probably accountable for their own earnings. The Adsense referral program for new business is probably individually accountable.

Current (Old) System Earnings

Based upon quarterly and yearly reports, Google on average pay publishers only 29% of advertising revenue. Larger publishers probably get a larger piece of the action, so it is quite possible a new publisher only receives 25%

For every dollar earned, Google receive $4

Referrals Changes the Math

For the first $5 of earnings in 6 months, they pay a referral fee of $5, thus Google only make 50%

If a publisher earns $100 in 6 months, Google pay a referral fee of $250, thus of the $400 they receive in advertising revenues, they pay out $350… plus there is a bonus

For 25 people who make $100 within a 180 day period you get a bonus payment of $2000, that is $80 per person

In theory, Google could pay out $430 for every $400 received

This is potentially a loss leader…

In practice only a small number of people make it even to $5, and even less to $100 within 180 days. Darren mentioned in his article that he has never achieved the bonus, though if he comes close, those $250 fees for the ones that do make $100 must be reasonably lucrative.

The New System

The Adsense Team are reverting back to $100 for $100 earned in 180 days with no bonuses.

Also the countries are now restricted to North America, Latin America, or Japan - for the referrer.

What Darren and Shoemoney didn't pick up on is that is existing referrals don't qualify by the time this is introduced, it seems like you will only receive compensation based upon the new structure, not the old. That is significant if you were in some way paying for advertising based on anticipated earnings over 6 months based upon prior statistics.

Gaming Adsense With Referral Hydras

For me the obvious reason why they would restrict this to only partners in certain counties is fraud, or gaming the system. Google is made up of regional offices, so it would be hard to separate Eastern Europe from the rest of Europe, or Australia from others in the Pacific region.