June 8, 2005

Tribune Newsday abandons AdSense in favor of a contextual product powered by Quigo.

As more and more newspapers are embracing Google AdSense and other third-party context-based advertising, Newsday Monday announced its in-house answer.

The Newsday program, called Pay-Per-Click, allows advertisers to place ads on the Newsday Web site associated with specific sections, subject matter, or geographical areas. Unlike classic banner ads—which are usually paid by “impression,” or the number of times the ad is displayed—Pay-Per-Click ads are free unless someone clicks on them.

Right now, Quigo is probably touting and pitching this to every newspaper its phone sales staff can call.

Google has historically been very generous with revenue sharing (most of the click) as a way to build out its content network. From Google’s YE 10-K filing:

The increase in our operating margin in 2004 compared to 2003 (before the charge related to the settlement of disputes with Yahoo) was partially offset by an increase in traffic acquisition costs as a percentage of revenues. This is because a greater portion of our revenues in 2004 compared to 2003 was from our Google Network members’ web sites rather than from our Google web sites. The operating margin we realize on revenues generated from our AdSense program is significantly lower than that generated from our web sites. This lower operating margin arises because most of the advertiser fees from our AdSense agreements are shared with our Google Network members, leaving only a portion of these fees for us.

Despite Google’s generosity, some newspapers have started to regard Google as a long-term competitive threat. Yahoo! offers Content Match, which is extensively used but not as deeply penetrated into the newspaper industry. Google recently enhanced AdSense by offering graphical ad capabilities and the ability to opt-out of certain content sites.

So-called “content pages” vastly outnumber search traffic in terms of potential ad inventory, but monetizing them has been more challenging. Because of the nature of the product, content CTRs are not as high or generally as qualified as search clicks—that’s part of the reason behavioral targeting exists.

Even though content targeting hasn’t been quite as effective as paid search, it’s a critical source of revenue and ad inventory. Revenues generated on the Google Network through AdSense contributed almost US$490 million, or 48% of total revenues in Q4 2004.

Source: Search Engine Journal

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