Foremski: Google's Q2 Growth Comes With $1B Pricetag From Publishers
The SiliconValleyWatcher himself, former FT reporter Tom Foremski, made a fascinating observation last week about Google’s torrid Q2 growth – the 39 percent revenue boost from Google’s own sites (compared to Q2 last year) to $6.23 billion was almost double the growth rate of partner sites that include large publishers who rely on ads to pay for the (largely) free news and content they offer consumers and businesses online.
“This huge disparity between the growth rates of Google sites and partner sites is without precedent for most of its history,” Foremski wrote, concluding, “This loss of growth parity with Google sites could cost Google partner sites more than $1 billion in lost revenues in 2011.”
A billion dollars may be small potatoes in the Washington debate over budget cuts and taxes – but in the American economy that’s a lot of jobs and a lot of money that could be invested in innovation and free services that would benefit consumers. You could say, that’s part of the Google Tax that American consumers and job creators pay for the company’s continued and expanding dominance of search and search advertising (does anyone really think Google’s proposed acquisition of online ad company Admeld, under antitrust review by the Justice Department, will increase competition in that market?!).
So, Foremski asked his readers: “Why are Google sites suddenly growing at nearly double the rate of partner sites when they have historically maintained near parity? What changed that could have produced such a massive boost?”
Wired magazine’s Ryan Singel responded: “There may be a one word explanation for why revenue from millions of websites slowed and Google’s own rose — Panda.”
No, he’s not referring to the National Zoo’s favorite imports Mei Xiang and Tian Tian. Singel attributes the growth to Google’s most recent major update (named Panda) to the black box search algorithm that determines how Websites are ranked on Google’s non-sponsored (a.k.a. “natural” or “organic”) results.
But one of Singel’s own readers “J.N.” may have explained it best in an email Singel posted on his blog:
“What you’re seeing is Google cutting out the middleman. There’s no reason for Google search to send users to made-for-Adsense pages, where Google shares revenue with the external site, when Google can get the revenue from an ad on the search result page.
“From Google’s perspective, Adsense sites are only worthwhile if they have their own organic traffic. If they get their traffic from Google search, they’re competition for Google’s own ads. It’s thus in Google’s interest to down-rate sites with ads in Google’s own search results…”
We couldn’t have said it better, J.N., even if we tried (see FairSearch post The $1B Google Bomb).