June 01, 2006, 12:52 AM — Google released an important new beta service this week, the AdSense API. According to Google, "The AdSense API is ideal for developers whose users create their own web content through web hosting, web publishing, blogging, and social networking applications."
Sites that feature user-generated content, such as Wikipedia, Flickr and MySpace, are becoming tremendously popular. The AdSense API gives developers a simple service that they can use to reward users for their contributions. In a nutshell, it lets developers include AdSense on their sites and split a portion of the revenue with site contributors.
At first glance, the Google AdSense API looks like it could be a win for both site owners and site contributors. There's a good possibility, though, that using the AdSense API could turn out to be a devil's bargain.
What is the AdSense API?
Even if don't use AdSense, you've seen it. AdSense is Google's program that lets publishers easily create ad blocks on their site that display Google-managed advertisements. AdSense has been widely adopted, because it is one of the easiest ways to generate revenue from your site.
With AdSense, site owners can display ads from hundreds of advertisers, and never have to deal directly with any of them: no selling, no billing, no collecting is needed. The price of this convenience is that Google takes a large, undisclosed, portion of the revenue that your site generates.
Google's new API is designed to let visitors at your site perform a variety of AdSense-related functions. With the API, visitors can
* Create an AdSense account
* Manage an AdSense account
* Create and modify AdSense for content ad units and link units, AdSense for search boxes, and Referrals
* View detailed reports to monitor performance and earnings
This may not sound very exciting by itself, but the API lets developers create community-driven sites or site areas that pay visitors for their contributions.
What's the Problem?
Google already dominates online advertising with its AdWords and AdSense services. According to Business 2.0 writer Om Malik, "Google is getting about 33% of the total online advertising pie."
AdSense is a bit of a catch-22 for content creators. While AdSense makes it easy to generate revenue from your site, Google takes a big cut. AdSense also displays an "Advertise on this site" ad for itself on your site, promoting Google as the dominant Internet ad service provider. AdSense users, by promoting AdSense and giving away a large portion of the revenue their sites generate, may ultimately be making it harder to maximize the revenue their sites generate.
The AdSense API promises a similar bargain. Community-driven sites that don't adopt the AdSense API may find it difficult to compete against those that do, because sites implementing the API will be paying their users. Sites that do adopt the API will find that they are giving a large portion of any ad revenue to Google, and sharing the remainder with users.
A volunteer-driven site like Wikipedia, which doesn't display advertising, could soon find itself competing against an encyclopedia that incorporates AdSense and pays its contributors. Contributors would have a financial incentive to link to and promote their contributions. If this happens, Wikipedia might have to decide between introducing advertising and losing many of its contributors.
The AdSense API: A Devil's Bargain?
The Google AdSense API is an important new service that offers community-driven sites a way to both make money and reward their contributors. It also provides a financial incentive for users to prefer sites that use the API and share revenue with Google. What remains to be seen is the price that site developers will have to pay for this bargain.
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