Google Reduces AdSense Referral Payout: What’s going on behind the scenes?

Website publishers who use Google’s AdSense advertising network received an email this week with some unpopular news: The kickback for referring other publishers to the AdSense platform is being drastically reduced.

Is this email an indication of Google maturing into a less-friendly, more profit-centric company? Or is something else going on?

The current pay structure of Google’s own referral program works like this:

• Referrers earn $5 when the referred publisher generates $5 in AdSense earnings.
• Referrers earn a nice $250 kickback when the referred publisher generates $100 through AdSense
• Referrers earn a fat $2000 kickback when a total of 25 publishers have been referred (provided they themselves also generate $100 through AdSense).

Disregarding the last bullet point above — which is more difficult to reach — the total kickback for referring a publisher (who in-turn earned $100) used to be $255.

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The New Payment Structure

Under Google’s new terms, the 3-tiered structure above is being abandoned in favor of a single-tier system: Publishers will now receive $100 when the referred publisher generates $100. No further goals will be rewarded after this point. In other words: AdSense publishers just saw their revenue get whacked by over 60% for Google AdSense referrals.

Why Did Google Reduce it’s AdSense Referral Payouts?

There are a number of reasons why this reduction in fees may have happened: For starters, Google may have been on the losing end of the equation. They were paying out $255 after only $100 had been generated. In other words Google was advancing the referrer $155 on the bet that the referred site would continue to generate revenue at a similar rate once it had already hit $100 in revenues. The practice seemed to make sense. After all — if a site has already generated $100 worth of clicks it was likely to carry-on generating revenue — eventually paying for the entire $255 originally shelled-out to the referrer. Right? Well, perhaps not. We don’t have the privilege of looking at Google’s books, but one reason Google may have backed out of its referral/compensation structure is that betting on the future returns of sites after earning their first $100 may not have been as cut-and-dry as it looked on paper.

Other Possibilities…

Website publishers using AdSense for the past few years have seen their AdSense content-advertising revenue slowly decrease. While there have been many rumours about Google slowly reducing its percentage/payout structure — Google has denied these theories. So why the reduction in payouts? There are a few other possibilities, and while we don’t want to read too deeply into Google’s policy-change, it isn’t every day we get a new datapoint that might give us some insight into the mysterious inner workings of Google. (And please excuse our shameless jumps to conclusions … we are fully aware that what follows is conjecture)

We know that payouts for publishers have been decreasing, and we know that Google claims it has not changed its formula for compensating publishers by a proportional measure. Could this mean that advertising spending as a whole is dropping? Or that there are simply too many small publishers competing over too few advertising dollars. (Let’s hope it’s not the latter — although the ease of launching a ‘made for AdSense’ website certainly suggests that the number of ‘content’ sites may be growing far more quickly than available advertising dollars).

Another possibility is that Google is trying to put the brakes on incentivizing new AdSense enrollees because of the proliferation of low-quality sites. By so strongly incentivizing new AdSense members — Google may have been contributing to its own well-known problem of blogspam and junk sites.

Does it matter?

It probably doesn’t make much of a difference to most bloggers and site publishers because Google referrals are usually not a primary profit center. While there are some blogs whose entire focus is essentially “Join AdSense Now for Big Bucks”, those sites are a small minority of AdSense publishers. WebRevenue.org doesn’t even utilize AdSense referrals (at the time of this writing, at least) so we won’t notice much of a change on our end.

If anyone out there will be impacted by this change, drop us a line and share some details.