Friday, January 20, 2012

Google AdSense, Panda Teams Out of Sync

Credit Suisse in its most recent report dated today January 20, 2012, believes that Google's Q1 algorithm change, code named Panda, was the cause of its 4.5% Google Network revenue growth forecast miss. 

The Google Network is a large group of websites and other products, such as email programs and blogs, who have partnered with Google to display Adsense ads. Panda is a change to the Google's search results ranking algorithm that was first released in February 2011.
The 4Q11 revenue performance was fueled primarily by Google Site revenues of $7.3 billion (up 29% year over year) vs. our  $7.7 billion estimate. Revenue from the Google Network totaled $2.9 billion, improving 15% year over year, but 4.5% under our $3.0 billion estimate. We believe that Google Network revenues was affected by the change (in 1Q11) to its algorithm to focus on sites with higher-quality content.  Credit Suisse
Panda aimed to lower the rank of "low-quality sites", and return higher-quality sites near the top of the search results. This change reportedly affected the rankings of almost 12 percent of all search results according to Steven Levy of Wired.com.

 
Image: (left) Google Adsense Support, This "heat map" illustrates the ideal placing on a sample page layout. Note the small area for primary content. (right) Google Panda Team suggests fewer ads and more content. 

The Adsense group at Google is separate from Google Search. The Google Search quality team put together the Panda update.  Website publishers receive mixed messages from Google.

The Adsense team advises users to 'put ads all over the site, while the Panda team is looking for quality websites with more high quality content rather than sites with little content and lots of ads.

It is logical that Adsense revenues would be adversely impacted by devaluing low quality sites that contain lots of ads and promoting sites with better content but lower ad quantity.

What doesn't make sense (coming from a shareholder point of view) is doing something that negatively impacts revenue without communicating the goal changes with the Google Adsense Team. Its like one hand doesn't know what the other is doing.

An example:

At the June 2011 SMX Search Marketing Expo in Seattle, Google Search Engineer Matt Cutts had this to say, "There's this mass perception outside the search industry that there's too much low quality stuff in the search results."

I guess Adsense, being outside the search marketing industry, didn't get the memo that they should be advising their publishers a better way to place their ads. 

As a Google stockholder, a customer and a vendor, it is essential that Google Network and Google Search get on the same page. For a better world, and a higher stock price, we need one consistent signal about content from Google, not two.

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