Saturday, 9 December 2006

AdWords Free Hosted Business Pages - A Good Thing for AdSense Publishers?

As I discuss elsewhere, Google is now offering free hosted business pages to users of AdWords starter edition who do not have a web site. If basic economic theory, and a few assumptions hold true, this should be a good thing for AdSense publishers. Let me explain . . .

1. If demand for a product goes up and supply remains the same, the price will go up. (See an explanation on Wikipedia.)
2. The availability of free hosted landing pages should increase demand for AdWords advertisements
3. Therefore, all other things being equal, the price of AdWords advertisements should increase.
4. Now, assuming that AdWords smart pricing doesn't undercut any such effect AND that AdSense publishers generally get a roughly fixed percentage of the cost the advertiser actually pays, if advertisers now pay more for their ads, the publishers of those ads should start receiving a higher average price per click - which sounds like a good thing for AdSense publishers!

Of course, as more and more people sign up for AdSense, the supply of advertising space also increases, so any gain may be short-lived so make the most of it while you can!

Like with all good economic theories, of course, this theory will only hold true if my assumptions are reasonably accurate, so here's hoping!

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1 comment:

kuchinskas said...

I think that's a very smart analysis -- and explains the business case for Google's free offering.