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Why Google AdSense Is The Heart And Soul Of Alphabet's Advertising Empire

Summary

There are hundreds of Google articles published here at Seeking Alpha. Not one managed to correctly pinpoint what makes its digital advertising program so effective.

Google's domination of the global digital advertising industry is due to its crowd-sourced content-driven way of disseminating ads.

Google AdSense is Alphabet’s way of recruiting creators, writers, artists, publishers, and website owners to produce content which can host AdWords/AdMob advertisements.

Like the old radio/TV ad industry, content is king. Digital advertisements are useless without content, like an article or a YouTube video, to deliver/host them.

Going forward, Google will eventually use its Artificial Intelligence leadership to help its creator partners accelerate their production of new content.

Seeking Alpha Editor Michael Hopkins challenged me last week to dig deeper into Google (GOOG) (GOOGL) AdWords or AdSense. Let us, therefore, make sense of Google AdSense. There are hundreds of articles about Google published here at Seeking Alpha. Not one of them discussed why AdSense is the real heart and soul of Google’s advertising empire.

AdSense helps Alphabet recruit an army of people and website owners to continuously create new online/mobile content where it can deliver Google AdWords advertising.

(Source: Google)

Without AdSense, Google’s ad-driven business would not have taken off. Strip away all the fancy write-ups about Google’s dominant search engine, the Android OS displacing Windows as the world’s most used, AdWords and AdMob’s accurate targeted ads, Artificial Intelligence leadership, and massive personal data mining capabilities. Dig deeper like SA Editor Hopkins told me.

You will eventually agree with my thesis that AdSense was and still is the most valuable component of Google’s content-driven advertising platform.

The founders of Google, Larry Page and Sergey Brin, understood that content is king. Their industry-leading search engine algorithm and advertising program are useless without evolving online/mobile content to host their ads and produce search results. Brin and Page had no choice but to invent Google AdSense in early 2003.

In my own math, AdSense is responsible for at least 50% of Alphabet’s current high valuation. As of today, 13.61 million websites have Google AdSense accounts. They are the least understood drivers behind Google’s massive advertising business. Most of these sites have YouTube channels and mobile apps too.

(Source: trends.buildwith.com)

Don’t underestimate and think that revenue related to AdSense is only applicable to Google Network Members sites (those enrolled in AdSense). The advertising revenue from Alphabet’s properties like the Android OS/Google Play Store, YouTube, and google.com are all influenced by how many people are actively creating content to maximize their AdSense income.

Source: Google

The top-earning YouTube stars like PewDiePie won’t be making $15 million/year if they did not have an AdSense account. Some people create YouTube videos not for the sake of amusing themselves and others. They do it because they have AdSense accounts that Google wants to fatten up with ad clicks dollars.

Why AdSense Was Necessary

AdSense was Google’s way to incentivize other people/website owners to keep creating content which could host Google advertisements. Back then, Google didn’t have the money to hire tens of thousands of employees to create millions of continuously updating websites. Google’s ultimate objective is to keep humans glued to their computer/smartphone screens for as long as possible.