It isn’t a revelation that we will face the deepening financial crisis just in the near future. How would it affect contextual advertising?
No matter how strong your will to avoid all these “depression talks” and let it fix itself, it is clear that this does not happen. One of the most probable scenarios for the next two years of global financial crisis is hyperinflation. The rapid depreciation of the money will have a significant impact on the segment of contextual advertising.
Let’s imagine that AdWords will use post-paid invoicing. In this case, the money Google get is no longer appropriate to the cost of services previously provided. Given that payments to publishers are to be made even later, this could be more or less all right, however, advertisers will try to delay the payment of bills, and Google’s internal costs will rise steadily. At some point, Google will require replenishment of the deposit for the use of AdWords service.
Placing a deposit on an advertiser’s account to spend it for an advertising campaign in the context of hyperinflation, where the game cost is growing constantly forced to change the parameters of an advertising campaign, and, respectively, increasing CPC. AdWords does not sell traffic for a fixed rate; instead, it operates in a lottery-auction manner, which results in hyperinflation eating up advertiser’s revenue, rather than Google’s revenue. In this case, it’s unprofitable for advertisers to keep funds on deposit and they will constantly replenish it with small payments.
Independent webmasters and mid-size sites owners that use contextual advertising to monetize their traffic during hyperinflation are most vulnerable. All payments they get for advertising and referrals from their sites are taking place with considerable delay, reducing the cost of funds.
The described situation makes use of contextual advertising (eg, AdWords-AdSense) unprofitable for an advertiser and, moreover, for a publisher. Large sites have a potential to solve it easily – they can sell their banner space to advertisers directly. Small sites will be in real trouble – hyperinflation will eat up the revenue of contextual advertising aggressively. Google will not be happy about losing its advertisers and publishers, too.
What could be the solution?
Either Google will develop its own or cooperate with an existing web instant payment system (smth. like PayPal) that will enable publishers to withdraw their earnings when they are needed, or the popularity of the AdSense publisher may drop dramatically.
There’s one born every minute, so, it is likely that while Google will slow the car to change direction, a new player in the contextual advertising market will come. If it will offer webmasters the opportunity to withdraw the funds earned or alternatively will pay out on a daily basis through PayPal – it potentially could grab out a substantial market share of contextual advertising.
The time will show.