Spam sites are mostly benefiting from Adsense advertising…and so is Google.

Today, Google’s (GOOG)  Matt Cutts blogged that they were aware of the recent complaints about spammy search results and were taking actions to correct them.  But complaints aren’t just that Google is showing spammy sites in the search results.  There is concern that the reason those spam sites are showing up higher than the original content they are reproducing is because Google is letting it happen.  Perhaps even making it happen.

There is a dangerous potentially anti-competitive business model at Google.  Google participates in two different businesses in the web ecosystem and one, if used improperly, could greatly affect the other.  Google searches for results and points people to what it thinks are the best results.  It owns 70-ish%  of this market depending on which part of the globe you are in.

Google also sells ads on third party sites that could benefit from higher ranking in search results.  The higher the ranking of Google’s partners sites, the more money their ads make.  Both Google and the third party grow richer as their rankings increase.

If Google prioritized sites that use its Adsense services in results, they could (and perhaps do) make a lot more money. Its also an incentive for third parties to use Google’s ads over competing ad sellers.

Just to put it into perspective, Adsense is big money, accounting for 30% of Google’s revenues.

From the latest Earnings report:

Google Network Revenues – Google’s partner sites generated revenues, through AdSense programs, of $2.50 billion, or 30% of total revenues, in the fourth quarter of 2010. This represents a 22% increase from fourth quarter 2009 network revenues of $2.04 billion.

Google is well aware of this issue.  Cutts goes to great lengths to show that Google doesn’t prop up sites that use its advertising saying, perhaps indicating where the issues might lie:

• Google absolutely takes action on sites that violate our quality guidelines regardless of whether they have ads powered by Google;
• Displaying Google ads does not help a site’s rankings in Google; and
• Buying Google ads does not increase a site’s rankings in Google’s search results.

Unfortunately, though Cutts seems like a genuinely decent guy, he’s offering no proof of those claims.  In fact, could Google even prove that it doesn’t discriminate against sites that don’t use its ads without revealing its search algorithms?   That’s a tough question but one Google might have to answer at some point in the future.

Additionally, Google could still be giving sites that use its ads an advantage just by not indexing Adsense ad content.  On sites with other company’s ads, Google could be indexing their ads’ content, thereby lowering their rank in an otherwise even field.

In fact, Adsense could be a good way for Google to find spammy sites.  It doesn’t take a PhD to figure out that if you are seeing five Adsense ads before you get to any meaningful content, you are probably on a spam site.  Google has an advantage over other search engines in this regard.

Still, I see these types of spammy sites at the top of Google results all the time.

That may sound petty but consider that Google makes almost a third of its money from Adsense ads.  Taking those adsense spam sites off the search results will cost Google some revenue.  If it is 1% of  their Adsense revenue, that is $25 million a quarter or $100 million/year.  That’s nothing to sneeze at.  The dollar amount could be much higher.

The bigger issue isn’t if Google is raising its own spam up artificially.  It might be or it may not be.  Google says it isn’t but many people think it does.

So the onus will be on Google to prove to governments and the world that it doesn’t.