In an earlier post, we debunked a myth that maximizing the number of displayed ads on a page will maximize your revenue. We had seen scenarios among our clients where YieldBuild had actually reduced the number of ads displayed on a page in order to maximize revenue.

So we ran on a test on our publisher site, HubPages.com, which also runs YieldBuild to maximize the revenue for us and the writers. The site has healthy traffic (over 13 million monthly pageviews) and diverse content lengths and layouts. We made the assumption that, since all ads were delivered via AdSense, and that content and traffic is stable across the site, that CTR was proportional to revenue.

The results confirm that more is not necessarily better:

The difference is not large (but it is statistically significant), and this is just one website, but it only takes one exception to disprove the rule. More ads does not necessarily mean more revenue.

Google AdWords has begun to test the ability to target ads on demographic data on publisher sites offering this sort of data to Google (and those who have gotten consent from their users).

AdWords does allow advertisers, in placement-targeted ads, to narrow down the field of potential sites to advertise on using broad demographic data like age, household income, ethnicity, and sex, but that’s just to find sites that tilt towards a certain group that an advertiser is trying to reach. This new feature will allow ads to target at the user-level - only those users meeting an advertiser’s demographic criteria will be shown the ads.

Of course, this feature will have enormous implications for social networks, which can often run lean on contextual clues with which to target ads, but are rich in demographic information on users, and which there is growing traffic momentum continuing towards.

Facebook’s SocialAds already offer similar targeting for advertisers, including the ability to target at the school level and stated interests, but SocialAds currently does not extend beyond the confines of Facebook’s site, and Facebook is not the only social networking site. The biggest player is still MySpace (which uses AdSense) and there are hundreds (thousands?) of Facebook applications that run AdSense.

A projection released today by the Yankee Group says the coming years will bring more of the same: double-digit year-on-year growth in online advertising spending through 2011, when the overall market is projected to reach $50 billion. People continue to move their time and attention online, and online ad spending has been following closely. The story for the past few years has concentrated on the search for inventory: contextual ad networks battling for big publishers, Google making forays into print and radio, and enormous valuations for big Web 2.0 sites like Facebook and YouTube where people are spending hours on a day.

But are we headed for a bubble?

The head of advertising giant Publicis, Maurice Levy, recently commented that the valuation of Facebook was absurd, saying “Far too many people are building plans based on advertising, and they may well be disappointed because there is not enough money for everyone.” Similar sentiments were expressed as the Web 1.0 bubble reached its peak, and the overreliance on banner ads as the basis for lofty valuations came into question.

A pessimistic view could be expected by the head of an advertising agency that has a far larger stake in traditional media advertising than it does in online, but he did concede that online advertising would continue to grow strongly, at the expense of traditional media advertising.

But are we turning a corner, in which online advertising, much like real estate these days, is turning into a buyer’s market rather than a seller’s?

Google, not surprisingly, has not dropped the ball when it comes to courting new advertisers. has not given up on the local market, often considered the largest potential market for contextual advertising but also the hardest nut to crack. It recently launched a contest for business school students to crowdsource ideas on how to reach potential local advertisers. So far 724 teams have signed up to get $200 worth of AdWords spending to work best for local merchants who have a Website but who haven’t tried advertising online. Winners get a week-long trip to Mountain View to rub elbows with the Google crew.

Not a major strategic move, for sure; just another suggestion that with other contextual ad networks peeling away its market share, Google will continue to have to demonstrate its value to would-be clients.

Entering the shopping ad network is newcomer Proximic, a CPC contextual ad network that will aggregate 50 million merchant listings from Yahoo Shopping and eBay’s Shopping.com. Their entry into a field of contextual shopping ad networks currently populated by Chitika, ShoppingAds and (partially) eBay is significant for the following reasons:

• it will pay publishers on a per-click basis (CPC), as opposed to a per-action/sale (CPA) basis employed by eBay
• it boasts 50 million product listings, a stab at Google AdSense, with an estimated 1 million unique ads in circulation at any given time
• it uses a more sophisticated contextual matching algorithm that searches for patterns of characters (”word shape”), making it language-independent and avoiding false matches that keyword-based matching traditionally used by its competitors is prone to (think ads for Mrs. Fields embedded in an article on how to clear cookies from your browser)

Of course, the number of ads/listings is not everything–this is a wide variation in the types of products that each of these networks carries. But Proximic would likely have the largest inventory of product listings that pay publishers on a per-click basis. And, because eBay AdContext is not openly available to all publishers (although it is available via YieldBuild), Proximic will the largest shopping ad network with respect to number of available listings. It will be the largest CPC shopping ad network, regardless.

But make no mistake, Proximic’s big foe is AdSense, the most recognized and deployed contextual ad solution for publishers (and a multibillion dollar revenue generator for Google). And despite adding another intermediary layer between advertiser and buyer, Proximic hopes to demonstrate its competitive value with substantially higher click-through: its tests claim CTRs of 1.5%, compared to the 0.25% seen with Google.

Effective the end of this month, Google has reduced its payout for new AdSense accounts for the Americas and Japan, while eliminating it completely from other geographies where it operates.

For the past year, the referral program has worked like this:

• referred publisher earns $5 within 180 days = you earn $5
• referred publisher earns $100 within 180 days = you earn $250
• 25 referred publishers earn $100 each within 180 days = you earn a bonus payment of $2000

Under the new terms:

• referrals from users in North America, Latin America and Japan who earn $100 within 180 days = you earn $100
• no referral payouts at all for referrers in other geographies

As you might imagine, reactions from prominent figures in the blogosphere (and, naturally, big referrers for AdSense), like Darren Rowse/Problogger and Shoemoney are not happy.

Why the change? Occam’s Razor would suggest the referral bonus program simply wasn’t working the way Google had wanted. However, the abrupt dropping of referral bonuses outside the Americas and Japan (instead of reducing them) suggests a strategic decision to reduce ad inventory in these regions.

AdWords, advertisers’ analog to (publishers’) AdSense, in December unveiled improved location targeting (geotargeting), allowing advertisers to target their ad campaigns to different geographies. (It allows picking geographies from a map, choosing individual states and even cities, and even a specified radius around a chosen point) Location Targeting is also a more prominent step in the campaign creation process, so advertisers might have started to pay more attention to it.

So the recent changes with AdWords might have demonstrated a waning demand for ad serving in geographies outside the US, Canada, Latin America and Japan, against the growing pool of published inventory.

Another possibility is that the number, breadth and sophistication of alternative ad networks has made the lifetime value of an AdSense signup lower. AdSense might be the first ad network that a publisher might go with, because it’s the easiest to install and it has a recognized, trusted brand name, but may switch to another with better payouts later. That’s especially true with niche publishers, who are increasingly pairing with niche ad networks, but also with more general publishers who have Yahoo, Microsoft and others moving more aggressively into the contextual ad space.

It’s hard to know. What is certain is that Google’s plea, “[We] hope it won’t cause you any inconvenience” is unlikely to assuage publishers that will be burned by this change.