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Google AdSense - Balancing supply and demand in a dynamic network

A strange thought just popped into my head: What if Google's content network pricing algorithms (smart pricing, etc.) are at least partially driven by the need to ensure adequate inventory ('supply') of ads to run on publisher sites on any given day?

In other words, in order to prevent showing blank ads or PSAs on lots of sites, they need to drop the actual per-click payout rates across the network in order to ensure that advertiser daily budgets are not exceeded too quickly... in order to have the ads shown across the network throughout the day.

Since pay per click (PPC) advertisers set a maximum cost per click, and daily max budget, at any given time, there is a fixed maximum payout that must be spread across all available content network web sites. I suppose this could also apply to cost per impression (CPM) ads.

Even if that's not the way it was designed, what if that's the actual result of all those algorithms ticking away silently deep within the Google Matrix... what if they're really, after all, trying to do a form of 'load balancing' - balancing the interlocked and mutually dependent supply and demand of advertisers and publishers?

great thoughts

Hey, what a great thought- I absolutely agree with you - there could be nothing worse than no ads to serve... so if supply on (adsense) sites goes up, the price per click must go down, unless advertisers increase as well

funny I never came across this thought on my typical 100+ SEO/SEM blogs I frequently read :-)


Outside the box

Thanks for the kind words.

I may be way off base, but it occurred to me that AdSense/AdWords would be in trouble if there was a shortage of ads to display on the content network. Webmasters would probably start dropping AdSense if they rarely see an ad, or if the ads were mostly PSAs.

I have no idea what kind of relative supply and demand Google has with AdSense/AdWords - if there are always more advertisers and advertisements than there are open slots in the content network, then this is probably not an issue, but, since there are many more publishers than there are advertisers, I assume the potential exists to 'run out' of inventory from which Google can fill the available AdSense publisher pages on the content network.