Why Google Might Have Changed AdSense Referral Terms

    January 9, 2008

Lots of talk today about Google changing the terms of their referral units for Google Adsense. Good coverage by both Darren and Jeremy.Google Adsense Referral Hydra

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.

If you look at this from the point of view of a person in a low income country, there is a potential $430 that could be earned instead of $100 for the clicks you might receive on a website you own that has reasonable traffic, all you need is new Adsense accounts.

Here is how such a system could work

  1. Find 25 people who would be interested in earning $100 from Google just for providing their personal details
  2. I can’t honestly imagine this wouldn’t be hard in many developing countries

  3. Place the advertising units from those referrals on your own websites such that they will earn $100 within a month
  4. The person referred gets $100 in Adsense earnings
  5. You get to cash $330 instead of $100

Rinse and repeat

If you don’t want to give $100 away, you could always set up shell companies., but I don’t think it is really worth the effort, it would be easy to find people willing to earn $100 for doing nothing.

If you are just doing blackhat stuff this provides an unlimited supply of fresh Adsense accounts, and you earn everything 100% "legitimately" as just the referrer.

Can It Really Be That Many People Doing This?

If you were a slightly shady blackhat, wouldn’t you like to keep your Adsense earnings 100% clean, and earn 3x as much?

Especially if you were living in a slightly poorer country, or had contacts in one… China, Russia..

Would This Hurt Google Financially

Certainly if it got out of hand. Most of these referrals would earn their $100 and then drop off the face of the earth after they cached their checks.

Could It Be Another Reason?

I am sure growth rates outside 1st World countries are fast enough without the financial incentive for referrals, and there is always a question of scaling up support costs, and the lack of competitive advertising.
With low paying clicks outside the English speaking world, those that are active Adsense publishers are often more inclined to experiment with more grey or blackhat methods, because they don’t necessarily have to create their own content to make money.

Too Good To Be True

I always looked on the referral program to be full of holes

  • You don’t know who you referred so you can’t help them, unless it is by arrangement
  • You can’t honestly declare you make money by referring people, it is against the referral program terms, though they encourage word of mouth marketing.
  • The reporting was always a little on the basic side
  • The time period for qualification was far too long and it seems that has come back to bite people

For a negative change such as this, you would expect a full 6 months notice, or for referrals who qualify within 6 months to be paid at the old rate.
For referring publishers outside North & South America, and Japan, they are effectively being told that all those referrals they have made that haven’t quite earned $100 by the end of January will not be paid.

I am glad I haven’t promoted Google Adsense for 2 years.


*Originally published at AndyBeard.eu