The AdSense support team keeps regurgitating the party line that site targeting "increases your revenue potential" as advertisers have to bid higher to get direct ad placement on your web site. Furthermore, support claimed that after I took a nasty decrease in earnings that it would've been even worse if people weren't directly bidding on my site.
Guess what you geniuses, when I'm losing money so are you so don't spout rhetoric at me when I'm telling you WE have a serious problem on my web site that can be backed up with a year of AdSense statistics telling a different story than your coporate line.
One word sums it up: HOGWASH
The original premise with Google Adwords was that Google would give all the ads a trial run on their search pages and only release the best converting ads into the content network. Now anyone that can bid the highest to site target and literally overrun your web site with ads based on bids alone, regardless of whether or not the ads are relevant or convert.
From Google's own AdSense web site:
Keep your users coming back with contextually targeted ads.
You want to make more money from advertising, but you don't want to serve untargeted ads to your users. Google AdSense™ solves this problem by automatically delivering text and image ads that are precisely targeted to your site and your site content—ads so well-matched, in fact, that your readers will actually find them useful.
That sure worked when that's all AdSense did.
For instance, a new meta search engine started running their off topic ads and they were showing up all over my site one weekend. Revenue took a nose dive but luckily I keep an eagle eye on my earnings and when it was down by 75% at noon I went looking at what could be going wrong. Traffic was normal but a couple of ads certainly weren't.
Dropped a few apparently site targeted ads in the competitive ad filter and my earnings started increasing again as soon as AdSense filtered them out, which can take up to 4 hours while your site is being held hostage by spammy advertisers. Basically, the earnings for the day were shot to hell but it rebounded and I've been keeping a close eye on anything that appears to be site targeted ads ever since.
The real issue is when you have a very specific niche web site that your visitors just won't click on any old spammy ad as they are on your web site for a purpose and the ads need to be contextual and appeal to your audience. That's what built AdSense in the first place and now Google is bouncing all over the map with features that let spammy advertisers muck up the place.
Typical example of Google trying to fix what was never broken.
Even the AdSense Forum on WebmasterWorld is finally starting to realize what's happening although I saw the potential for problems the first day AdSense released this new feature but it took other people a while to catch on.
The basic problem with site targeting is that the webmaster needs the ability to approve which ads run and which ads don't to control the situation. The current implementation actually gives advertisers more control over your website with AdWords than you have in AdSense!
I guess that's the philosophical difference between products like AdBrite which gives the website owner total control versus AdSense which treats webmasters like mushrooms, keeping them in the dark and feeding them lots of shit.