Google released earnings today:

Since I've accused them in the past of being able to just take a larger cut of AdSense dollars as the middle man whenever they choose, it was interesting to see their breakdown in the earnings statement:

Google Network Revenues - Google's partner sites generated revenues, through AdSense programs, of $1.20 billion, or 37% of total revenues, in the fourth quarter of 2006. This is a 50% increase over network revenues of $799 million generated in the fourth quarter of 2005 and a 16% increase over third quarter 2006 revenues of $1.04 billion.

The majority of TAC expense is related to amounts ultimately paid to our AdSense partners, which totaled $916 million in the fourth quarter of 2006.

So Google really only takes about a 25% cut. That's far less then I expected. I assumed they were taking at least 100% of what they pay their AdSense partners, but they seem to pay quite fairly. So what would explain the eCPM (how much Google pays me) dropping so much if their total advertising revenue is rising?

The only thing I can think is that Google is a victim of it's own success. There must be a bigger increase in AdSense websites then there is in advertisers spending. I am going to try Yahoo's Overture (if they ever get around to approving me) and see if they pay more. It's a catch-22 for Google because it seems they can't really pay more, or charge more, so they almost need to encourage less sites to carry AdSense if they want sites to carry it in the first place....

FIOS

As I mentioned in a previous post, I had to go back to my arch nemesis, Verizon, to get their high speed fiber optic service. Well I am online now, and I thought I would give it a quick review.

First, the install is very odd. They give you a free wireless router, which isn't that odd, but it's about a foot and a half tall. Odder still, they install a UPS! I asked the installer why I need a UPS, and he said if my power goes out, I can still get on the Internet for up to 4 hours... too bad my laptop battery wouldn't hold out that long, but good to know in a Doomsday scenario I can still check my Gmail.

I originally just had TV service installed, because if I didn't like it, I didn't want to have to mess around with switching my firewall's settings back and forth (I have a hardware VPN from my home network and my colocation facility). I decided to get the Internet later, so the installer told me since I already have the router, they should just be able to "flip a switch". I called, and they told me "no, a tech had to come out on a business day from 9-5". But since they put the SSID and network key, I tried connecting to the router, and can get on fine... so I'm still not really impressed by Verizon's customer service.

Now the speed. I signed up for the low-end FIOS with a 5 mps downstream and 2mps upstream. I did two speed tests from my notebook (over a wireless connection) on the cable connection and FIOS. Here are the results:

Comcast Cable Modem:
Downstream: 902 kbs
Upstream: 721kbs

FIOS:
Downstream: 2972kbs
Upstream: 1473kbs

Three times faster downloading and double the speed uploading, not too shabby for $3 less a month!

I should mention I almost never had any connection problems with Comcast. It was down for maybe a total of 24 hours in the 3 years I've owned this house. Hopefully Verizon will have as good of a track record.

MySpace Scaling

Interesting article about how MySpace has scaled as it has grown so quickly (from Slashdot). I'm very impressed at how quickly they could switch from one method to the next. I've seen corporate server migrations take years.

The Biggest Money Saver for Bootstrappers

A good article today on MSN Money about The Reason You Are Broke comes at the intersection of two of my interests, budgeting and used cars. It's amazing to me how much people spend on new cars these days. Your typical mid-sized family sedan costs around $25k brand new. If you are planning on bootstrapping your own mISV, I see this as one of the biggest money savers around. Increase sales by 5% or Decrease expenses by 10%, sometimes the latter is easier.

Most people I know that buy new cars tell me the number one reason is they know that if something breaks, it will be fixed under warranty. These people most likely had a used Ford or Mitsubishi 15 years ago and remembered being stuck on the highway one too many times. Others just like that new car smell.

They make air fresheners for the latter, but for the former, that concern is largely illogical these days. Let's assume being budget minded I bought a brand new Honda Civic. They run about $16k. Over a 5-year loan, the payment would be about $350 a month. A few years ago (2002) I sold my Audi A6 and bought a 1991 Honda Civic for $1,200 with 120,000 miles on it. Over the next 2.5 years I put 80,000 miles on that car, selling it just shy of 200k miles. I sold it for $1,700. My monthly payment worked out to be a profit of $20 a month. Ok, but the new Honda Civic would have had repairs paid for out of warranty. How much did I pay for repairs on that junker? A grand total of ~$600. Let's assume though that the engine died, and I needed a new engine 3 times. At $2k a pop, in the end I still would have only paid a third of what it would have cost me for the new car.

What's my point? Sometimes the best way to increase your money made, is to decrease your expenses. Look at how much you are actually spending on things like cars and clothes and decide if the "look" or the "convenience" is actually worth the money spent, and figure out how much harder you have to work on your ISV to get to that level.

Why You Shouldn't Start a Business Based on AdSense

Not long ago, I talked about my great success adding AdSense to my used car site. For a while, it was great, the more clicks I got, the more money I made. Unfortunately, starting around September, the relationship between money earned, and ads clicked started to differ wildly.

I made a graph of what's going on (click to see larger):


The red line represents the click trends, which follow the general traffic trends of our site, which is basically a nice Sin curve following the times of year when people shop for cars.

The blue line is what Google is paying per 1000 clicks (it's on a different scale then the other line, scales not shown).

The interesting thing is how it started out with a very close coorelation, but over time has gotten eratic, and now it's simply divergent (The more clicks I'm getting, the less Google is paying??). Assuming all sites in my same category are getting more clicks over all, shouldn't that increase the price for ads? It's sketchy how Google keeps the actual breakdown of price paid per click secret. They can essentially "take profits" as the middle man any time they want, with no way of us auditing. It's their right to do this, but this is why I think it's silly to base a new company on AdSense as I see some doing. How can you possibly anticipate profits when there is no relation to the amount of clicks and the price paid? (The content doesn't really change on my site).

If there is no profit taking going on, is the market for AdWords slowing or drying? It seems like from the point of view of someone paying for AdWords, Google has only increased costs. Maybe I am missing some more obvious explanation for the results above.

Update on BudgetSimple

Just to tie up the loose ends on older blog posts, I wanted to mention how BudgetSimple is doing. First, if you remember, it's a free online budgeting tool, so whether a million people or one sign up I make $0. Partly because of that, I havn't had a lot of time to dedicate to it in terms of marketing. In fact, all of the marketing I did was on week one, where I had a blog for BudgetSimple (now killed, again, no time), and a blog post here.

From those two simple actions, the links have spread all over the Intarweb. To date, 1400 people have signed up. It seems maybe 10% of those are regularly active. I've had a few thank you letters, and a few bug reports and feature requests. Even though it's free, I really enjoy that people are getting something out of the software, and hopefully saving more or paying off debt because of it. I also like the subject matter of BudgetSimple (I'm a secret accounting nerd kind of), so I look forward to spending more time on it soon.

Also, the blog has gone purple, to match the city of Baltimore as long as the Ravens are in the playoffs!

My Love Hate Relationship with Verizon

Verizon, the phone provider for most of the Mid-Atlantic, has had an interesting relationship with me over the years. I last had their standard phone service 4 years ago, before I switched entirely to cell phone and VOIP. They charged a fortune, billed incorrectly often, and had terrible service. I was extremely happy to have them out of my life.

Until one summer day last year, when the Fiber Optic man came to lay cables in my backyard. "Whatcha doin mister?", I asked. "Laying Fiber Optic cable so you can get FIOS TV and Internet". "Whats that you say? A dedicated 15mbps downstream for the same price I pay for cable? Who would provide such a wonderful service?", I winced at the answer. "Verizon".

I didn't order right away. I hated Verizon, and my Internet speeds get me along OK. Until a friend got FIOS TV. It basically offers all the channels Comcast and DirectTV combined, for less then either of them. Now, they are really selling to my cheap side. So I ordered it. The install date was a month in the future, with an old fashioned service window of "9-5". Great, gotta take a day off of work or Telework for you Verizon, this better be good.

But just as Verizon was winning my heart, I realized that all of my email sent to Verizon.net email addresses was bouncing back. At first I just thought the sender had changed their email address. Then I noticed the pattern. Every single email I sent from a hosted Gmail account bounced back. I tried contacting their Whitelisting service, but they claim I'm not blocked. I havn't been able to get anyone to help me figure it out, and keep getting chain mails. As happy as I am that there is finally someone helping to break the monopoly cable has over TV, why does it have to be Verizon?? If anyone knows what the deal is with Verizon blacklisting Gmail, let me know.