Google making more, but dishing out less

Google’s earnings are on everyone’s lips – and with a reason. Read Google By The Numbers over at Business 2.0 website, and you will be impressed. What caught my eye was the amount of money Google generated from what it calls the “Google Network Sites,” and how it is basically helping foster a financial ecoystem. Google calls it “traffic acquisition costs.”

Intrigued, I looked up some of the SEC filings and discovered that for past four quarters Google has been paying more money every quarter to the affiliates. However, TAC as a percentage of advertising revenues generated by network sites is declining. For instance in quarter ending June 30, 2004, the company had paid out 80% of the revenues generated by its network. In quarter ending Sept 30, 2004, it was down to 79% and now in the December 2004 quarter, that number was down to 77%.

Traffic Acquisition Costs, the portion of revenues shared with Googles partners, increased to $378 million or 77% of Google Network revenues. This compares to total payments to partners of $216 million in the fourth quarter of 2003, or 85% of Google Network revenues.

Now one way to read it is that, with their dominance on the contextual ad-market complete, they are doing the slow squeeze on the publishers. I hope not, since do no evil is their motto!