April 2008 – Andrew E. Scott

Google sends me cheques

Okay, they’re not very big cheques, but the ads on this site apparently get clicked on by enough people that Google sends me cheques. Okay, only one cheque so far. It was for $120.47 – that’s enough to pay for my hosting fees.

Although, I hear you asking, how can an obscure personal blog get enough visits – let alone clicks – for Google ads to work? This is an obvious question, with a pretty interesting answer, that if I have it right, suggests that web ads are a special case of search ads.

A quick tutorial. Google has two advertising programs: AdSense and AdWords. AdWords enables advertisers to submit ads that are displayed against particular words or search terms (e.g. “negative gearing”). AdSense enables web page authors/publishers to give-up space on their pages for ads to shown. Google matches the AdWords advertisers with AdSense publishers in order to maximise the chance of visitors clicking on the ads.

I am a member of the AdSense program, but it’s really token involvement. You’ll see only a single text-based ad block, capable of showing two ads, on any page. I’m not exactly running an advertising honey-pot, here.

However, apparently certain pages on this site are popular enough to attract a significant amount of traffic. The top pages are (in order):

Now, I haven’t run the stats (yet), but of the above, the only pages with ads that seem likely to generate clicks are the Best Man Speech, Cheesecake Recipe, Positive Gearing Analysis and Investment Book Reviews. These aren’t pages that change at all often, so it’s not my regular readers (!) who are clicking on those ads. I think this is the norm for blogs – it’s not the regular readers generating advertising revenue.

The ad revenue comes from those who arrive on the site via web searches. Near 80% of all visits come from search engines. The top search terms of visitors are:

“best man speech”, “best man speeches”, and “bestman speeches”
“cheesecake recipe” and “cheesecake recipes”
“positive gearing”

Those terms account for a third of all search visitors, and there are several other variants of those. What it strongly suggests is that there are people searching for particular terms, and instead of clicking on the paid ads in the search results they click on a link to one of my pages. And then, once they’ve arrived on one of my pages, they click on a paid ad.

One explanation is that the pages on my blog provide a type of advertising filter. Perhaps the search engine , say Google, is not able to fine-tune the paid ads when all it has to go on is the term “best man speech”, but when Google can utilise all of the words in one of my pages, it does much better. So much so that people click first on a real page, not as a way of getting everything they want, but as a way of giving Google more information on what they’re after.

And a diversity of topics on a blog lends itself to being used by Google in this way. Typically a blog will focus on a single topic and build up a readership that is strongly interested in that topic. But those readers aren’t likely to be clicking on ads anyway. So my atypical approach of rambling wildly about many things doesn’t build up much of a readership, but it does enable Google to use my content to optimise its ads and hence pay me a small commission when people click on them.

The Summit – or perhaps a long way from it

2020 Summit logo I have been pretty interested in seeing the outcomes of the Australia 2020 Summit, and even put my own submission in. And in trying to find some detail on how the first day of The Summit went, I came across Andrew Bolt’s blog posts on it.

Andrew Bolt is pretty amusing, and strongly stands in the conservative camp. But I could not believe what I was reading – it sounded like the first day was a complete waste of time. How could this have happened – surely it was professionally facilitated? Well, I then checked out the the video of the first day’s plenary highlights.

It wasn’t as bad as I had feared, but it was pretty bad. Almost everyone put on camera struggled to communicate their thoughts or articulate what initiatives are looking likely. Most seemed to be in awe of the celebrities and powerbrokers also present. We got a lot of motherhood statements, but they genuinely seemed to feel uplifted by being a part.

However, the Summit’s not for them, it’s for us. Here are the initiatives that were mentioned by people in the video:

Put indigenous people on the boards of cultural organisations.
Establish a Ministry of Culture (don’t we have one already?).
Draft a national Cultural Policy (isn’t that it’s job?).
Mandate a national Creative Curriculum.
Draft a national Action Plan for Social Inclusion.
Provide one-stop-shops for local communities for housing and communal support.
Establish a Community Services Commission, like the Productivity Commission.
Establish a National Sustainability Commissioner, like the ACCC.
Draft a national agreement/treaty with indigenous peoples.
Set a policy of continuous disclosure for the government, particularly online.
Draft a Bill of Rights.
Become a Republic.
Establish a “rights based labour mobility programme” to enable Pacific peoples to work in Australia.

Alright – that last one isn’t like the others. It is actually an idea that sounds new.

I understand that each of the ten groups is meant to identify one “big idea” and two or three smaller policy initiatives that could be worked on following the Summit. So, that’s up to 40 actionable items in all. The list above is for 13 items, so they still have 27 to find.

I really do wish them all the best, but if the above represents the results from Day 1 then there’s still a long way to go to fulfill the ambitions of the Summit by the end of Day 2.

All part of Sony’s grand plan?

From the side-lines, it’s been hard to fathom what Sony is up to. In fact, it’s easier to explain their actions as a lack of strategy rather than a grand plan. But, for the sake of argument, let’s assume they’ve got one.

Kate sent me a link to an article at The Age about James Gosling, who was touring around Australia recently. He’s an interesting guy, and I actually got to meet him. I also heard him speak at Sun Tech Day at the start of March, where he voiced an interesting thought: that players for Blu-ray Discs (got to have the hyphen) could make excellent TV set-top boxes.

The recent version of the Blu-ray specification (called Profile 2.0, also known as BD-Live) requires that the player has an Ethernet port, the ability to connect to the Internet, and 1GB of local storage. It’s intended for newer content to be pulled off the web to supplement the disc, rather having to rely on what’s stored on the disc. However, there’s nothing really to stop it from pulling all the content from the web, and having nothing on the disc. The disc could be a bit like the BBC iPlayer, and enable you to watch any movies or TV programs you like without having to insert a new disc.

And now that Sony’s won the HD-DVD vs Blu-ray war, we’re all going to eventually get Blu-ray players to make use of the High Definition TV screens we’re all buying. But what makes this different from all the other Sony boxes that you’ve ever bought, is that you may never need to replace any of your media.

Basically, every time Sony’s come up with a new format, they’ve needed to take one of two approaches: provide backwards compatibility with previous formats, or get people to buy all new stuff that conforms to the new format. The PlayStation is a great example of them following the former strategy – the PS2 and PS3 have been backwardly compatible, allowing people to keep old games. However, most of the time, Sony follows the latter strategy. Do you remember any of these..

Betamax, introduced by Sony in the mid 1970s – long dead
Compact Disc (CD), introduced by Sony and Philips in the early 1980s – terminal illness
Digital Audio Tape (DAT), introduced by Sony in the mid 1980s – now dead
MiniDisc (MD), introduced by Sony in the early 1990s – close to death
Memory Stick, introduced by Sony in the late 1990s – over the hill
Universal Media Disc (UMD), introduced by Sony in the mid 2000s – sad and lonely

You will note that none of those technologies was backwards compatible. With Blu-Ray, Sony has changed the game, and can potentially avoid the need to provide backwards compatibility – by delivering content from the Internet rather than on physical media.

The need to get people to purchase new media every time, meant that Sony could really only rely on selling a new box to play the media every 10-15 years or so, since there was such (understandable) resistance in replacing collections of music and movies. Without this limitation, Sony can continue to innovate with formats, adding new audio and video technologies which need new boxes to play, but without requiring customers to buy new media – since the content will be delivered from the Net. They will be able to sell people new boxes every 2-5 years, and stay ahead of the cheaper boxes coming out of China which will not have the latest features.

Or maybe this is all dreaming on my part, and Sony has no such plan at all.

Why negative gearing is not going away

Attacking the practice of negative gearing appears to have become a bit of a sport lately. On the 14th March, an article in the Herald Sun stated the government “should look at ways to overhaul an extremely generous system of negative gearing”, and on the 20th March, The Age ran an opinion piece entitled “It’s time to apply the brakes to negative gearing”.

I could speculate that the attention property investors (and their tax deductions) is due to the combination of increasing rents (driven by low vacancy rates) and high property prices (driven by a long stint of housing affordability). However, the cause is not important, and what is important is understanding why negative gearing is an effective housing subsidy.

In the Taxation StatisticsÂ 2005-06 publication from the ATO, we can see that:

There were 1,561,630 people who declared rental income on their personal tax returns.
66.5% of those had a taxable loss (net return income less than zero) from their rental properties.
There were 2,146,685 property schedules completed for those tax returns (note: where multiple people own a property, multiple schedules may be completed for those properties).

And in the Census 2006 QuickStats for Australia from the ABS, we can see that:

27.2% of occupied private dwellings were rented, which corresponds to 2,063,947 dwellings. (Pretty close to the 2,146,685 figure above.)

While in the Australian Social Trends 2007 from the ABS:

There were 394,000 first home buyers in 2003-04.

So, from that barrage of stats, it should be clear that the number of renters outnumbers the first home buyers (in any one year) by over five to one, and the number of renters combined with the property investors outnumbers them over nine to one. Why compare with the first home buyers? Because they are really the only housing segment that is disadvantaged by negative gearing. Beneficiaries include renters, existing home owners, investors and the state governments (through higher land tax and stamp duty fees).

Renters have their rent subsided by the ATO, though the tax deduction on costs provided to their landlords. What other business but property rental is regularly undertaken at a loss? It should be admitted the “obvious” effect of removing the deduction – rising rents – is unproven.

I would expect it to be likely that rents would rise, both from scarcity due to fewer landlords willing to operate without such a deduction, and from those willing to be landlords increasing their rents to maintain their investment yields. However, back in 2003, the ANZ’s Saul Eslake analysed the last time negative gearing was removed (by Paul Keating, between 1985 and 1987) and commented that:

It’s true, according to Real Estate Institute data, that rents went up in Sydney and Perth. But the same data doesn’t show any discernable increase in the other State capitals. I would say that, if negative gearing had been responsible for a surge in rents, then you should have observed it everywhere, not just two capitals.

So history is inconclusive. And, rents aside, although you might think that renters would benefit from being able to escape the rental market, many of them don’t want to. A survey by AAMI published on the 3rd April indicated that 39% of renters are “happy to rent and have no plans to have a mortgage.”

Existing home owners benefit from rising house prices since while prices go up, their morgage does not. Although when they come to buy another house, they will need to pay higher prices, they will typically sell their old house into the same market. Also, at some point, they will exit the housing market, and benefit from selling their house without having to buy one.

And that brings us to the conclusion. The group of people able to remove negative gearing are democratically-elected politicians. It’s highly unlikely that such a person will remove a policy that benefits so many, particularly when it’s a Labor government and renters are one of groups that benefit. True, it was a Labor government that removed it last time, but that also means they will clearly remember the embarrassment of having to reinstate it.

Let’s end the lies

10 week ultrasound We’re now telling people something we were denying before – that we’re expecting a baby. Kate’s 17 weeks pregnant, in fact. And the baby’s due around 10th September.

It’s a relief to no longer have to cover it up, and it’s exciting to be able to announce it to people. However, it’s a bit odd that something so positive is typically hidden from friends for several months before being suddenly sprung on them.

Ironically, the friends often already know, or at least are pretty suspicious. The signs are everywhere, and good friends tend to notice. Even if there is no morning sickness or change in body shape, the dietary hints are pretty clear. They wonder why a glass of wine, normally happily accepted, is now sadly refused. They ponder why the brie and proscuitto goes uneaten, and perhaps even why the seafood option isn’t chosen from the menu (although that’s never an option for us anyway). And particularly, “women of a certain age” are well attuned to these signs in their friends, but in the end are too polite to ask.

So, those people who we find it so painful to hide the news from are the very people that know anyway. Both parties (us and them) engage in a comedic farce where we all pretend nothing is going on at all, while desperately wanting to speak about it to the other.

But now, released from that cultural prison, I can tell you that I am very pleased (although a bit terrified) about the idea of becoming a dad.