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The great Google float

April 24, 2006

The best business model ever created has to be the float. You hold on to other people's money for them, and you get to keep the interest. It's a beautiful thing. One of my favorite business stories is the tale of how J.C. Fargo, the president of American Express, became so annoyed trying to get cash while on an 1890 trip through Europe that he went home and invented the travelers cheque. What he didn't even realize is that the float on all those cheques would quickly become a huge money maker for his company. He must have felt like he had fallen into a big tub of cash.

I've been thinking about the great little float that Google's got going with AdSense. AdSense is the program that allows publishers to run Google ads on their sites (like those ugly little boxes over there in the right column) and earn a cut of the ad revenues. It sounds totally win-win, but there's a catch: Google doesn't pay you until your AdSense balance goes over $100. That's nothing for the relatively small number of big sites that make serious AdSense dough, but it's actually a big hurdle for most AdSense members, who may only make a few cents or a few dollars a week. In a post earlier this month, blogger Scott Karp talked about the frustrations of the $100 rule:

Google AdSense has an onerous policy of only paying publishers when they earn more than $100. I have $22.60 stuck in my AdSense account, with little hope of getting it out any time in the foreseeable future. In fact, if I abandoned AdSense now, Google would get to keep that $22.60. (It’s clear to me now why Google has so much cash in its coffers — stealing from the little guy!)

Karp then went on to ask his readers to click on his AdSense ads in order to get his balance over $100, a move that seems to have landed him in hot water with Google's enforcers.

I think Karp's mistaken about not being able to get his $22.60 from Google. If you're one of the five losers on earth who has actually bothered to read the AdSense fine print (yes, I'm one of them), you'll know that if you formally terminate your AdSense membership, by sending an email to adsense-support@google.com, then Google will send you your balance in 90 days, as long as it's more than ten bucks. (If it's less than $10, you're hosed. That turns into Larry and Sergey's walking-around money, I guess.)

Google doesn't seem to disclose how many sites are enrolled in AdSense, but it has to be a hell of a lot. Last year, Google took in about $2.7 billion through ads on other people's sites, accounting for 44% of its ad revenues. Most of that money probably came through big sites, but a decent portion must have come from the little guys. When you add up all the under-$100 AdSense balances earned by the Scott Karps of the world, the total must be a pretty impressive number. That's free working capital for Google, or it can invest the stash and make even more money. It's a devilishly good idea.

But it gets even better. Once a little publisher gets a little balance in his account, he becomes more likely to stick with the AdSense program. After all, he doesn't want to "lose" the money he's already earned (and, like Karp, he probably doesn't realize that he would be able to get it by terminating his account). He struggles on, earning a penny here and a penny there, waiting month after month for the $100 mark to arrive. He becomes another Google sharecropper, one of the thousands working the rocky soil of the AdSense plantation. And all the while Google gets to hold onto the poor sap's meager earnings, using them for its own purposes. In many cases, I'm sure, the less-than-$100 balances never get collected, and Google gets to pocket them for good.

Better than any other company on earth, Google knows the power of very small amounts of money. Collect enough nickels and dimes and quarters and dollars, and you can make billions. The $100 AdSense hurdle may seem like a little thing, but it's making Google some serious money. At the very least, I bet it pays for the cafeteria at the 'Plex.


Excellent post. Very interesting.

Do you know if the other players in that market have the same $100 policy (YPN, etc)?

Posted by: MGR [TypeKey Profile Page] at April 24, 2006 09:16 PM

MGR: Good question. YPN also has a $100 minimum for payments, and in fact appears to be more onerous since if you quit the $100 minimum still seems to apply. Pheedo has a $50 minimum for monthly payments, but will pay any balance above $1 at the end of every calendar year. AdBrite lets you set your own minimum payment level. Amazon Associates has a $10 minimum for direct deposit, or $100 for payment by check.

Posted by: Nick Carr [TypeKey Profile Page] at April 24, 2006 10:20 PM

Great Post! I'm one of those people who are stuck under a $100. Its digusting!! :-)

Posted by: Kirby Witmer [TypeKey Profile Page] at April 25, 2006 08:51 AM

IIRC, Google pays out all outstanding balances at the end of the year. They did last year (or 2 years ago, can't remember), so they might've changed it, but I don't think so.

"Karp then went on to ask his readers to click on his AdSense ads in order to get his balance over $100"

That's just plain wrong. He's basically stealing money from advertisers. Instead of asking visitors to click, he should work on getting more traffic.

Posted by: Dennis Pallett at April 25, 2006 09:14 AM

At the end of the year (Dec 31), Google will actually send you all your money in the bin whatever it amounts to. Unless of course you opted to have it On Hold.

That's how I got my first cheque back in Jan/Feb 2004.

Posted by: Abe Olandres at April 25, 2006 09:36 AM

I am $3.95 under the $100 limit and for some reason the clicks on my site have slowed to a crawl.

Posted by: Shane at April 25, 2006 09:36 AM

Great points Nick. Interestingly, however, Google's business model (in terms of converting earnings into cash) isn't anywhere as close to as powerful as other companies like Dell. You can measure the float by looking at payables and receivables. In fact, Google's payables grow much more slowly (in dollars) than receivables. Google's business model does not create float, in spite of the minimum payments it places on the small publishers. We can only conclude that the large publishers are often paid on different terms.

Posted by: Rick Summer [TypeKey Profile Page] at April 25, 2006 10:06 AM

Dennis and Abe, That's news to me. I had about a $30 balance in my account on Dec. 31, 2005. It's now April 25, 2006, and I haven't received any end-of-year payment. Nick

Posted by: Nick Carr at April 25, 2006 10:10 AM

The year-end payout of any balance still remaining in your account was scrapped.

It certainly is clear that Google has a license to do as it pleases. Ever wondered how they determine how much you get and how they keep?

What's the formula? It's like they have a lever that they can pull at any time they need to blow away the Street's earnings estimates.

Things not looking good? Reduce the percentage that goes to publishers and hey presto, you've made your numbers.

Very, er, un-transparent.

Posted by: Dominic Jones at April 25, 2006 10:44 AM

PlentyOfFish, a site with 15 million page-views per day, reportedly rakes in $10k per day from AdSense. That's $1 per 1500 page-views, or 150k page-views to crack the $100 barrier. Not many blogs rack up 150k page-views in a year...

Posted by: Liam @ Web 2.5 Blog at April 25, 2006 11:29 AM

Nick, so contact them. Every year for the last 3 I've gotten cheques from them at the end of the year :)

Posted by: Jeremy Wright at April 25, 2006 11:31 AM

Obviously, such Google rule is a great hurdle for the blogger who publishs Adsense ads very like what Karp had done. Google likes feedbacks with which Google can upgrade their services, either this or that one, will Google also hear those who complain $100 obstacle for small adsenser publisher? It's suspected!

Posted by: Random Citations at April 25, 2006 12:01 PM

I dont think the float produced by adsense to be big enough for google to bother...Lets do a small math.

Lets assume there are a total of 2 million adsensers and approximately half of them make less than $100 a month and lets say they in an average they make $60 a year...So the float comes to $60 million a year...Assuming a generous interest of 7% google just makes $4.2 million which is basically a rounding error in google's earning

Posted by: G at April 25, 2006 12:13 PM

If we do some math on made up numbers

1,000,000 sites that use AdSense and don't make $100.

x $30 avg each site has in its balance.

x 15% return on invesment


$4,500,000 per year. For a company that makes billions of dollars per year, this is pocket change. Nice to have, but not meaningful to the company in any way.

Posted by: Brian at April 25, 2006 12:38 PM

Even if google is keeping all that money, since they belong to publishers I doubt they would invest it anywhere other than risk-free securities like government bonds, in which case the interest earned would not be such a hefty amount.

Posted by: Hardik Thakkar at April 25, 2006 01:54 PM

Nick, nice to have you back -- couldn't resist the blogging siren song, eh?

It's a pleasure to provide you with fodder once again, but I'm afraid I agree with Brian's math -- it's a nice bit of working capital, but nothing significant.

Much more interesting is to speculate what would happen if one could instigate a revolt against Google and cause a million fed up site owners to cancel their AdSense accounts en masse, i.e. what would happen if the float suddenly sunk?

Posted by: Scott Karp [TypeKey Profile Page] at April 25, 2006 05:28 PM

Hm. Let's do some calculations: about 1% of blogs receive the traffic necessary to support adwords, and half of these may carry them (others do nothing or YPN). According to Technorati's latest stats, that would be about 170K blogs. Some of these will have very short carry, since they hit the $100 mark frequently, but the majority that we are concerned about here do not - so an average of $20, let's say?

So at $20 * 170K blogs = $3.4M. The float on that is $170,000 a year. Traveler's checks this ain't.

I'd like somewhere much more prosaic than secret conspiracy - namely that cash transfers cost money to process, and Google is eating that fee in return for you not withdrawing below certain amounts. I suppose if you pressed them, they could just charge a surcharge of $10 for everything below $100, but people would probably get even more upset about that...

Posted by: Tubby Bartles [TypeKey Profile Page] at April 25, 2006 08:42 PM

Thanks for the various estimates. It's hard to judge the accuracy of the assumptions (# of members, ave. balances), but they certainly seem within the realm of reason. So the float on the sub-$100 balances may not be particularly material to Google's finances. But that's not the whole story here. If you want to get a full sense of the total AdSense float, you have to go further, also accounting for the larger earners. Google pays AdSense balances of more than $100 about 30 days after the end of the month in which they're earned. So even for very big balances, Google is holding the balance for between 30 and 60 days (45 on average). If that PlentyofFish site, for instance, really does make $10,000 a day in AdSense earnings, you can see that the total Google AdSense float could be considerably higher than the float represented by the under-$100 crowd alone.

Of course, you also have to account for the payment schedule for the advertisers (through AdWords). Google automatically deducts AdWords payments when an AdWords account hits its credit limit (limits range from a minimum of $50 to a maximum is $500) or every 30 days, if the credit limit isn't reached. (For some foreign accounts, it requires prepayments.) So, in short, it collects from advertisers considerably more quickly than it pays out to publishers, but there can be a lag of up to 30 days before collections. (And, of course, some publishers and advertisers get special treatment, with their own contract terms.)

I'll leave it to someone else to take a stab at an overall estimate of the AdSense float.

I'm not in any way criticizing Google for any of this, by the way (other than the $100 minimum, which, at least for electronic transfers, does seem unnecessarily onerous for the little guys). Companies always try to collect their receivables faster than they dole out their payables, and for some companies, like Dell, the astute management of collection and payment cycles lies close to the heart of their strategies. Nothing wrong with that.

Posted by: Nick Carr [TypeKey Profile Page] at April 25, 2006 09:49 PM

I wonder what the SEC rules are for reporting the float? It could be an area that needs SEC attention, as in the case of the software companies in the 1980s (ORCL et al) that had to be brought into a standard reporting rule...

Posted by: Tom Foremski [TypeKey Profile Page] at April 26, 2006 04:32 AM

God Bless America!

Posted by: hightechadrian [TypeKey Profile Page] at April 26, 2006 09:36 AM

When you joined AdSense, you agreed to Google's payment terms. They're not hidden, they're right in the AdSense terms and conditions, see Section 11. Most programs have a minimum that must be reached before payment occurs, so Google is no different in this respect than anyone else.

And there's certainly nothing to report to the SEC about any of this!

Posted by: Eric Giguere [TypeKey Profile Page] at April 26, 2006 10:26 AM

Google is running more than a float operation.

I have a friend who owns a check cashing store where they sell money orders. They sell the money orders very cheaply and sometimes they give it away with other purchases.

He told me the ONLY reason they sell money orders is because about 25% of them are NEVER cashed and the moneyorder companies (ex. moneygram which belongs to American Express) give them major incentives for large volume sales.

The moneyorder issuing companies can count on a percentage of these NEVER being cashed, especially the smaller amount ones. I would assume a large percentage of travelers checks and gift certificates, etc are like this as well.

He told me that over the years, American Express has collected BILLIONS in UNPAID moneyorders and travelers checks. So, this goes beyond the float.

Even if Google is only holding 5 to 60 million in under-$100 payments every year, and their owners dont ask for payment, as time passes this amount would acumulate and grow TREMENDOUSLY.

No matter how small the yearly amount is, OVER TIME it will grow to significatnt figures, even with low investment returns. I see why Google does not AUTOMATICALLY pay out sub $100 balances every year.

Google uses this technique even when paying out the $100 referal fee to its affiliates who refer new adsense members. You dont get paid the referal fee until your new referee makes $100 in clicks. And if they dont reach this $100 goal within 90 days of signing up, you lose the $100. How many new adsense account holders can realistically expect to reach $100 in 3 months? Who knows how many millions of dollars Google DOESNT pay out because of this minimum-requirement technique.

There is a science to making money and Google understands this very well. Believe it or not, Google may be anticipating its sub-$100 account as a potential huge income generator. Imagine, if Google keeps signing up more and more adsense accounts (with the $100 referer fee lure which rarely gets paid), and most adsense accounts stay under $100, over time the revenue flow can become IMMENSE. Google basically, gets FREE recruitment work, FREE advertisement placement, FREE content, FREE bandwidth, on millions of websites.

What a sweet deal for Google! I am glad because I love Google and I hope they keep succeeding.

I bet Google probably paid some or most of their recent $99 million click-fraud lawsuit settlement out of this under-$100 slush-fund.

Posted by: jezibel [TypeKey Profile Page] at April 26, 2006 11:24 AM

Most talk about the return of bucks after one year. But one year is a great period and when you park it intelligently it will return at the least 6% interest pa even considering bank rate.

Posted by: karthik at April 28, 2006 01:00 AM

Here are a couple of 'the right thing to do's for Google or Yahoo: http://www.raghusrinivasan.com/blog/2006/04/27/do-you-have-less-than-100-in-your-adsense-or-ypn-account/

Posted by: Raghu at April 28, 2006 11:11 AM

In the world of phone cards (it has been some years since I was in this world), there is almost always some amount left on the card which would not even buy you a single unit to the cheapest destination.

Your loss, their gain and here in the UK it was called 'breakage'.

This is not the same as Google's $100, but it still fits the 'lots of little bits make a big bit' concept.

Posted by: Mark .T at April 28, 2006 12:58 PM

Google does not pay at year end...I've crossed over to a new year with money (under $100) in my account and never got paid....until I hit the $100.

AND,, why is everyone complaining. I'm surprised the $100 threshold isn't higher. At what amount would you want it to be??

Think of it from a business perspective...the expense and administration if having to pay out at every, let's say, $10 earned. I don't think google would want that administrative and expensive headache of mailing checks so often. Would you?

Posted by: TP at April 28, 2006 06:34 PM

To get closer to the $100 threshold think about the placement of your Google Ads and the colours used, Google even offers some useful tips:


Posted by: Craig McGinty [TypeKey Profile Page] at April 29, 2006 06:39 AM

Likening bloggers to sharecroppers demeans the sharecropper who, at least, sweats for the pennies he gets from the Man.

Posted by: LuckyWilberry at May 1, 2006 12:11 PM

I don't think it's a bad thing that google's Adsense system is making a nice profit.

Where is the money coming from ? The companies with products and services that want to pay for advertisement.

In the modern day of "EVERY BODY HAVING A WEB SITE" what website's actually put these advertisements to use ?

Angry at the chump change you made? The key is to have high traffic and higher possibilities for users to click on the advertisement. Become a larger player in a specific market and let advertisers in on your supply of interested users.
So if you have a small blog site with 3 hits per day.... don't expect anything because it's not really worth anything.

Google earns the foating dollars, and should profit for providing this very smart service. The web arena has billion's of users and If you can't earn more that $100 in two months then maybe this solution is not for you yet.

Posted by: Bobby Razor at May 17, 2006 04:31 PM

I understand here what your talking about.

I just made $117 in one day on adsense. It's the only thing that has ever worked for me.

Posted by: Gareth at September 20, 2006 03:03 AM

Google Adsense is fantastic... its only 3/4 through the month and i have already made "US$175.41". And i only have a very small site with limited content...

Posted by: danielson1988 [TypeKey Profile Page] at February 21, 2007 08:24 AM

Nice article - and Google are still utilizing other people's money over a year later. An admirable business model.

One alternative is Bidvertiser, which only has a $10 minimum payout making it ideal for smaller/newer websites. If you get enough traffic, though, Adsense is still the biggest and the best.


Posted by: W3WAD.COM [TypeKey Profile Page] at September 3, 2007 10:37 AM

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