Every business dreams of having workers it doesn't have to pay. Has Google cracked it?

One of the secrets of Google’s success is, by all accounts, its grasp of long-tail theory. Applying the theory to Google’s business implies that there are a relatively small number of advertisers with very large budgets, and a very large number of advertisers with small budgets - but that the sum total of all the small budgets greatly outweighs the few large ones.

It’s a theory, anyway, and there seems to be plenty of truth in it if Google’s bulging bottom line is anything to go by.

Whatever model you subscribe to, Google is certainly a dab hand at mopping up money from advertisers large and small with its AdWords programme. And it has proven equally adept at signing up content providers large and small, hoping to get a slice of Google’s action by carrying its AdSense adverts.

One interesting wrinkle of the long-tail business model is that Google ends up having financial arrangements with a very large number of advertisers and affiliates.

To simplify matters on both fronts, it automates billing and payment. Unless advertisers choose to pre-pay, they are therefore charged only when their ads have been clicked on by sufficient numbers of people. AdSense affiliates, meanwhile, are paid when their account is $100 or more in credit at the end of the month. Until the account gets to $100, they are not paid at all.

This is where the long-tail theory really pays off for Google.

Google’s process for matching adverts to content is pretty good, so it’s typical for content providers to see a promising click-through rate on the ads they host. But even so, most small sites – the web’s army of bloggers, for example – will be lucky to amass more than a dollar in AdSense revenue per thousand page impressions.

A modest site with, say, a couple of thousand page views per month will therefore need to carry Google advertising for about four years before it sees a cent in revenue.

Google, meanwhile, doesn’t care how many of these small sites it signs up. It can aggregate millions of tiny content providers to amass a worthwhile advertising environment for any advertiser.

If you follow long tail theory, there are a lot more small content providers than there are big sites. Which means that there will be a great many sites still waiting to amass enough clicks to get their first $100 payment from Google. The odd $5 balance here and $20 there may well add up to a very large sum of money sitting, waiting, in Google's coffers. (Google’s financial data doesn’t mention debt, but I’m assuming the firm makes a provision on its balance sheet for the money that it owes to affiliates and hasn’t yet paid).

Interestingly, if you follow long tail theory to its logical extreme, there will be a significant number of sites carrying Google ads at such a low rate that they will shut up shop and disappear without ever getting paid.

All of which is nice work if you can get it. And Google certainly gets it.