Monday, October 15, 2007

AdSense and the weak US dollar

After much cajoling my me via Twitter and Second Life over the past month, Duncan Riley finally wrote on TechCrunch today about the effects of the devaluation of the US dollar on the tech startup sector. Duncan is a busy man so his post was understandably brief, focusing on the main winners and losers, but as with all good TC articles, the discussion in the comments fills in the holes of understanding of the breadth of the issue, including the impact on Canadian contractors, US freelancers and Indian outsourcers.

The issue is close to my heart because I run several sites which have Google AdSense advertisements as their primary (but not only) revenue source. Google pays its publishers in American dollars, which as the greenback deflates is losing people like me more and more money over time. On this year alone, as can be seen below, the US$ has dropped 9% against the A$, which translates directly into lost profits for my AdSense-reliant businesses. I can only imagine what the numbers must be like for heavy-duty AdSense publishers like Canadian Markus Frind.

It is basic economic theory that exporters are hurt by a dipping currency in their buyer's economy because their export products become less competitive on price compared to local suppliers. Rather than fleeing from AdSense to other products - given that no non-US alternative has gained any traction - I think the net effect of the falling US dollar will be to add to the encouragement for non-US-based startups to relocate to the US, so that they get full value for their money. Of course, depending on the part of the US you move to, the increased living costs are likely to eat up any savings, but of course there are other benefits to being near a startup hub, as Paul Graham told us so depressingly.

The economics of Web hosting (which I whinged about in May '06) have already mandated that non-American businesses host their data in the US. Add the depreciating Benjamin to the list of reasons why startup founders' physical forms will follow their ones and zeroes to Seppo Land.


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